• USD/CAD scales higher for the third straight day and inches back closer to the monthly peak.
  • Hawkish Fed expectations and recession fears continue to benefit the safe-haven greenback.
  • Softer crude oil prices undermine the loonie and remain supportive ahead of Canadian data.

The USD/CAD pair gains traction for the third successive day and climbs back closer to the monthly peak during the Asian session on Friday. This also marks the fifth day of a positive move in the previous six and is sponsored by sustained US dollar buying. Firming expectations that the Fed would stick to its policy tightening path continues to lend support to the greenback and lifts it to a one-month high on the last day of the week. The FOMC minutes released on Wednesday indicated that policymakers remain committed to raising interest rates to tame inflation. The bets were reaffirmed by this week's mostly upbeat US macro data and the recent hawkish remarks by several Fed officials.

On Thursday, the US published Initial Jobless Claims, which declined more-than-anticipated to 250K last week. Furthermore, the Philly Fed Manufacturing Index jumped to 6.2 in August, surpassing estimates for an improvement to -5 from the -12.3 previous. This comes on the back of Wednesday's upbeat consumer spending data and reinforced hawkish Fed expectations. Adding to this, San Francisco Fed President Mary Daly noted that the US inflation rate is too high and a 50 or 75 bps rate increase would be appropriate at the September FOMC meeting. Separately, St. Louis Fed President James Bullard said that given the strength of the economy, he is leaning toward a third straight 75 bps rate hike next month.

This, in turn, remains supportive of elevated US Treasury bond yields. Apart from this, the prevalent cautious mood - amid growing recession fears - further seems to benefit the safe-haven greenback. Meanwhile, concerns that a global economic downturn would hurt fuel demand keep a lid on the overnight strong recovery in crude oil prices from a multi-month low. This, in turn, underpins the commodity-linked loonie and provides an additional lift to the USD/CAD pair. In the absence of any market-moving economic data from the US, traders on Friday would take cues from Canadian Retail Sales figures. This, along with the USD/oil price dynamics, might produce short-term trading opportunities.

Technical Outlook

From a technical perspective, the monthly swing high, around the 1.2980-1.2985 region, coincides with the 50% Fibonacci retracement level of the July-August downfall. This is closely followed by the 1.3000 psychological mark, which if cleared decisively would be seen as a fresh trigger for bullish traders. The USD/CAD pair could then climb to the 61.8% Fibo. level, around the 1.3035 zone and extend the momentum further towards the next relevant hurdle near the 1.3080 horizontal level. Some follow-through buying has the potential to lift spot prices beyond the 1.3100 mark, towards the recent daily closing highs, around the 1.3115 area.

On the flip side, the 38.2% Fibo. level, nearing the 1.2930-1.2920 horizontal resistance breakpoint, now seems to protect the immediate downside ahead of the 1.2900 round-figure mark. Any further decline is more likely to find decent support and remain limited near the 23.6% Fibo. level, around the 1.2845-1.2840 region. Failure to defend the said support level, leading to a subsequent break below the 100-day SMA, currently around the 1.2815 area, would negate any near-term positive bias. The USD/CAD pair would then turn vulnerable to accelerate the slide back towards the 1.2760 intermediate support en route to the monthly low, around the 1.2730-1.2725 area touched last week.

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 stays below 0.9800 after US inflation data

EUR/USD stays below 0.9800 after US inflation data

EUR/USD continues to trade in negative territory below 0.9800 in the American session on Friday. The data from the US showed that the annual PCE inflation declined to 6.2% in August but the stronger-than-expected core reading didn't allow the pair to gain traction.

EUR/USD News

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD rebounds from daily lows, reclaims 1.1100

GBP/USD fell to a fresh daily low below 1.1030 but managed to reverse its direction and climbed above 1.1100 during the American trading hours on Friday. The pair remains on track to snap a two-week losing streak despite having suffered heavy losses earlier in the week.

GBP/USD News

Gold extends daily rally beyond $1,670

Gold extends daily rally beyond $1,670

Gold preserved its bullish momentum and rose above $1,670 after the mixed inflation data from the US on Friday. The benchmark 10-year yield is down more than 2% as markets look to wrap up the third quarter, fueling XAU/USD's daily rally. 

Gold News

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shiba Eternity download day the biggest bullish catalyst in SHIB history?

Shytoshi Kusama, the project lead for Shiba Inu, has dropped a teaser about Shiba Eternity games for the SHIB community. Proponents expect the launch of the collectible card game to be a bullish catalyst for Shiba Inu price. 

Read more

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

SPDR S&P 500 ETF Trust (SPY) Forecast: We are teetering on the brink

Equity markets remain at the precipice of a technical collapse, which we examine in the weekly long-term chart below. The overall picture remains one of nervousness ahead of the upcoming Q3 earnings season.

Read more

Majors

Cryptocurrencies

Signatures