- USD/CAD rises for the sixth day in a row and hits a one-and-a-half week high.
- Aggressive Fed outlook boosts USD and remains a support for the pair’s upside move.
- The decline in oil prices weakens the CAD and also contributes to intraday strength.
The USD/CAD regains traction after an initial drop to the 1.3680 area and is in positive territory for the sixth consecutive day Thursday. The pair rises above 1.3750, hitting a 1 1/2 week high during the European session, and looks poised to prolong the recent bounce from levels below 1.3500. At time of writing, the pair trades in the area of daily highs at 1.3767up 0.41% on the day.
The underlying bullish sentiment around the US dollar, reinforced by a more hawkish stance taken by the Federal Reserve, turns out to be a key factor offering support to the USD/CAD pair. It is worth remembering that the US central bank raised interest rates by 75 basis points for the fourth time in a row to combat persistent inflation. Also, the Fed chairman, Jerome Powell, shattered expectations of a dovish turnaround and said rates would have to rise more than expected.
A further rise in US Treasury yields reinforces prospects for further Fed policy tightening and continues to act as a tailwind for the dollar. Also, softer risk tone provides additional boost to safe-haven USD. On the other hand, modest pullback in crude oil prices from three-week highs is undermining the CAD, currency linked to raw materials. This, in turn, supports the prospects for a further short-term move higher for the USD/CAD pair.
Even from a technical point of view, strong post-FOMC move saw the pair break above the 1.3670-1.3685 resistance zone. The subsequent strength and acceptance above the 1.3700 level reaffirms the positive bias and favors the bulls, suggesting that the path of least resistance for the USD/CAD pair is to the upside. Market participants are now awaiting the US services PMI which, together with US bond yields, will boost the dollar and provide some lift to the pair.
USD/CAD technical levels
Source: Fx Street
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