- USD/CAD witnessed an intraday pullback from over a two-year high touched on Thursday.
- An uptick in oil prices underpinned the loonie and exerted pressure amid a sharp USD fall.
- Hawkish Fed expectations, recession fears act as a tailwind for the buck and limit losses.
- Traders now eye Canadian Retail Sales, US PMIs for some impetus ahead of Fed’s Powell.
The USD/CAD pair witnessed good two-way price moves on Thursday and was influenced by a combination of diverging forces. Russia announced an immediate partial military mobilization and raised the risk of a further escalation in the conflict with Ukraine, fueling supply concerns. This, in turn, provided a modest lift to crude oil prices, which underpinned the commodity-linked loonie. Apart from this, a sharp US dollar pullback from a two-decade high prompted some intraday selling around the major.
The sharp USD downfall was sponsored by a massive rally in the Japanese yen that followed news that the Japanese government has intervened in the forex market. That said, a more hawkish stance adopted by the Fed, signalling large rate hikes at its upcoming meetings, acted as a tailwind for the greenback. Apart from this, the prevalent risk-off mood assisted the safe-haven buck to recover a major part of its intraday losses and assisted the USD/CAD pair to find decent support near the 1.3400 mark.
The market sentiment remains fragile amid worries that rapidly rising borrowing costs will lead to a deeper global economic downturn. Furthermore, China's zero-covid policy adds to a deteriorating fuel demand outlook and exerts fresh downward pressure on crude oil prices. The USD, on the other hand, draws support from a further rise in the US Treasury bond yields. This, in turn, allows the USD/CAD pair to hold steady near the 1.3500 psychological mark through the Asian session on Friday.
Market participants now look forward to the Canadian monthly Retail Sales data, which, along with the flash US PMI prints, could provide some impetus to the USD/CAD pair. The focus, however, will remain on Fed Chair Jerome Powell's speech at an event in Washington, which will play a key role in driving the USD demand. Apart from this, traders will take cues from the broader risk sentiment and oil price dynamics to grab short-term opportunities on the last day of the week.
From a technical perspective, this week's breakout through a resistance marked by the top end of a multi-month-old ascending channel favours bullish traders. The emergence of some dip-buying on Thursday adds credence to the constructive outlook and supports prospects for additional gains. Hence, a move back towards the overnight swing high, around the 1.3545 region, en route to the 1.3600 round-figure mark, remains a distinct possibility. That said, technical indicators on the daily chart are already flashing overbought conditions and warrant some caution.
On the flip side, the ascending channel resistance breakpoint, currently around the 1.3425-1.3420 area, now seems to protect the immediate downside ahead of the 1.3400 mark. Any subsequent fall could be seen as a buying opportunity and remain limited near the 1.3345 region. A convincing break below the latter might prompt some technical selling and make the USD/CAD pair vulnerable to weaken further below the 1.3300 mark. The corrective decline could get extended towards another strong resistance breakpoint, now turned support near the 1.3220-1.3210 zone, which should now act as a strong base for spot prices.
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.
Follow us on Telegram
Stay updated of all the news
EUR/USD retreats to 1.0750, looks to post small weekly gains
EUR/USD lost its traction and declined to the 1.0750 area in the American session on Friday. In the absence of high-tier data releases, week-end flows seem to be impacting the pair's action heading into the weekend.
GBP/USD holds above 1.2550 ahead of the weekend
GBP/USD keeps its footing on Friday and trades modestly higher on the day above 1.2550 following Thursday's rally. Ahead of next week's all-important US inflation data and Fed policy announcements, modest US Dollar weakness allows the pair to stay in positive territory.
Gold struggles to find direction, holds steady near $1,960
Gold price struggles to make a decisive move in either direction on Friday in the absence of high-impact data releases. The benchmark 10-year US Treasury bond yield stays relatively calm above 3.7% following Thursday's slide, limiting XAU/USD's action.
Weekly Roundup: Binance US halts fiat services, Coinbase does business as usual, XRP hits key milestone
The US financial regulator, the Securities and Exchange Commission’s (SEC) clampdown on exchange negatively influenced the crypto market and assets throughout the week. The lawsuits against Binance and Coinbase resulted in several challenges for the platforms’ users.
The Week Ahead - FOMC, ECB and Bank of Japan, US CPI, China retail sales and Tesco results
A busy week is ahead, including meetings from the Federal Reserve, the European Central Bank, and the Bank of Japan. Data to be released includes US CPI and China retail sales. Tesco will also release results.