• USD/CAD attracted fresh buying on Wednesday and stalled its recent corrective fall from the YTD top.
  • A slump in oil prices undermined the loonie and extended support amid a pickup in the USD demand.
  • Investors now eye the Canadian CPI report for some impetus ahead of Fed Chair Powell’s testimony.

The USD/CAD pair regained positive traction during the Asian session on Wednesday and snapped a two-day losing streak to the 1.2900 neighbourhood, stalling the recent pullback from the YTD peak. As investors looked past Tuesday's upbeat Canadian Retail Sales data, a sharp fall in crude oil prices undermined the commodity-linked loonie. Investors remain concerned about slowing global economic growth and fuel demand. This, along with a push by US President Joe Biden to bring down soaring fuel costs, dragged crude oil prices to over a one-month low.

Apart from this, the emergence of fresh US dollar buying extended support to the USD/CAD pair. The USD continued drawing support from firming market expectations that the Federal Reserve would retain its aggressive policy tightening stance to curb soaring inflation. The bets were reaffirmed by Fed Governor Christopher Waller's comments on Sunday, saying that he was open to another rate hike of 75 bps in July. Moreover, the Fed's dot plot showed that the median projection for the federal funds rate stood at 3.4% for 2022 and 3.8% in 2023.

Meanwhile, investors remain worried that a more aggressive move by major central banks to combat stubbornly high inflation would pose challenges to global economic growth. This was evident from a generally weaker tone around the equity markets, which was seen as another factor that benefitted the safe-haven greenback. The combination of factors pushed the USD/CAD pair back above the mid-1.2900s, though it remains to be seen if bulls are able to capitalize on the move or refrain from placing fresh bets ahead of the key data/event risks.

Wednesday's economic docket highlights the release of the latest Canadian consumer inflation figures, which along with oil price dynamics, will influence the CAD. The focus, however, will remain on Fed Chair Jerome Powell's semi-annual testimony before the Senate Banking Committee. Apart from this, traders will take cues from the US bond yields and the broader market risk sentiment. This, in turn, would drive the USD demand and produce short-term trading opportunities around the USD/CAD pair.

Technical outlook

From a technical perspective, the recent pullback from the YTD peak stalled near the 1.2900 mark. The said handle should now act as a key pivotal point and is closely followed by the 1.2885-1.2880 horizontal resistance breakpoint. Some follow-through selling would suggest that the USD/CAD pair has topped out in the near-term and prompt aggressive selling. Spot prices would then accelerate the fall towards testing the next relevant support near the 1.2800 round-figure mark.

On the flip side, the 1.3000 psychological mark now seems to act as an immediate resistance ahead of the recent daily closing high, around the 1.3025 region. Sustained strength beyond has the potential to lift the USD/CAD pair back towards the 1.3075-1.3080 supply zone. Some follow-through buying, leading to a subsequent move beyond the 1.3100 mark, would be seen as a fresh trigger for bullish traders and pave the way for an extension of a two-week-old upward trajectory.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news Join Telegram

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD recovers above 1.0450 as USD slips ahead of US inflation

EUR/USD recovers above 1.0450 as USD slips ahead of US inflation

EUR/USD is trading above 1.0450, displaying a modest rebound on a minor pullback in the US dollar. The US Treasury yields rebound amid cautious optimism, ahead of PCE inflation. The US Core PCE Price Index is seen easing to 4.7% YoY in May. 

EUR/USD News

GBP/USD advances towards 1.2150 amid USD retreat, US data eyed

GBP/USD advances towards 1.2150 amid USD retreat, US data eyed

GBP/USD is advancing towards 1.2150 amid a broad US dollar retreat, despite a mixed market mood. BOE's Bailey said the UK economy is facing a very large real income shock. UK data and US PCE inflation awaited. 

GBP/USD News

Gold seems vulnerable near two-week low, eyes US PCE inflation data

Gold seems vulnerable near two-week low, eyes US PCE inflation data

Gold traded with a mild negative bias for the fourth successive day on Thursday and languished near a two-week low touched the previous day. The XAUUSD was last seen hovering around the $1,816 region and was pressured by the prospects for more aggressive rate hikes by the Fed.

Gold News

Breaking: Bitcoin price drops below $19,000

Breaking: Bitcoin price drops below $19,000

Bitcoin price has breached a critical area of support over the past few hours, dipping below $19,000. Transaction history shows that a large number of addresses acquired BTC above $20,000. 

Read more

FXStreet Premium users exceed expectations

FXStreet Premium users exceed expectations

Tap into our 20 years Forex trading experience and get ahead of the markets. Maximize our actionable content, be part of our community, and chat with our experts. Join FXStreet Premium today!

BECOME PREMIUM

Majors

Cryptocurrencies

Signatures