- USDCAD falls to its lowest level since September 20 and is under pressure from a combination of factors.
- The recovery in crude oil prices underpins the CAD and drags the pair lower amid sustained USD selling.
- Expectations for a less aggressive Fed rate hike, falling US bond yields and risk-on sentiment weigh on the dollar.
The pair USDCAD fails to capitalize on its modest intraday rally to levels just above 1.3350 and attracts fresh selling on the last day of the week. The pair falls to its lowest level since September 20, around the 1.3284 area during the first half of the European session and is under pressure from a combination of factors.
Crude oil prices rallied more than 3% on Friday in reaction to news that Chinathe world’s largest oil importer, eased some of the strict COVID restrictions. This, in turn, underpins the commodity-linked CAD and drags the USDCAD lower for the second day in a row, also marking the fifth day of negative movement in the previous six. Apart from this, the prevailing selling bias around the US Dollar (USD) is seen as another factor putting downward pressure on the pair.
In fact, the dollar index, which measures the evolution of the greenback against a basket of currencies, reaches its lowest level in two and a half months, amid the expectations of a less aggressive tightening of Fed policy. Softer figures for US consumer inflation, released on Thursday, indicate that the worst of the post-pandemic price rebound is over. The data reaffirms expectations in favor of smaller rate hikes from the Fed in the coming months, leading to a further decline in US bond yields and weighing on the dollar.
Furthermore, risk sentiment, represented by a strong rally in equity markets, is taking its toll on the safe-haven dollar. That said, the oversold conditions on the intraday charts offer some support to the USDCAD pair and help limit the downside, at least for now. Traders now await the US economic docket, with the release of the Preliminary US Consumer Sentiment Index from Michigan for some short-term opportunities later in the American session.
USDCAD technical levels
Source: Fx Street
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