- A combination of factors helped the USD / CAD gain traction for the fourth consecutive session.
- The sudden aggressive shift by the Fed brought the USD index to the highest level in two months.
- Falling oil prices undermined the loonie and further contributed to the positive move.
The pair USD / CAD jumped to fresh seven-week highs during the early days of the American session, and the bulls are now looking to take advantage of the momentum beyond 1.2400.
The pair built on the strong positive move after the FOMC this week and rose for the fourth consecutive session on Friday. This also marked the fifth day of a positive move in the previous six and was sponsored by a combination of factors.
The US dollar remained high near two-month highs and remained well supported by the Fed’s sudden hard-line shift. The Fed advanced its projections for the first post-pandemic interest rate hikes to late 2023 from Wednesday’s June policy meeting.
The bulls took signs of a sharp decline in equity markets, which tends to benefit the dollar’s relative safe-haven status. The combination of factors, to a greater extent, helped offset the ongoing decline in US Treasury yields.
Meanwhile, concerns that an earlier-than-expected Fed rate hike will hurt growth prospects and affect fuel demand weighed on crude oil prices. This, in turn, undermined the commodity-linked Canadian dollar and provided additional boost to the USD / CAD pair.
With the latest stretch to the upside, the pair has now recovered nearly 400 pips from near the key psychological level of 1.2000, or multi-year lows touched earlier this month. The slightly overbought RSI on the short-term charts could contain any further gains.
That said, the fundamental backdrop remains tilted in favor of bearish traders and supports prospects for an extension of the ongoing positive momentum. Therefore, a further move towards the next relevant hurdle, around the 1.2470 level, remains a clear possibility.
Technical levels
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