- USD/CAD gained strong follow-through traction for the fourth consecutive session on Thursday.
- Wednesday’s hawkish FOMC minutes, COVID-19 jitters continued benefitting the safe-haven USD.
- Retreating crude oil prices undermined the loonie and provided an additional boost to the major.
The USD/CAD pair caught some fresh bids during the early European session and shot to the highest level since April 21, around mid-1.2500s in the last hour.
A combination of supporting factors assisted the USD/CAD pair to build on this week's strong move up and gain positive traction for the fourth consecutive session on Thursday. The US dollar stood tall near three-month tops and remained well supported by indications that the Fed is moving towards tightening its monetary policy as soon as this year. Apart from this, the recent sharp pullback in crude oil prices undermined the commodity-linked loonie and provided an additional boost to the major.
The June FOMC meeting minutes released on Wednesday revealed that policymakers expect conditions to reduce the pace of asset purchases could be met earlier than previously anticipated. Fed officials also agreed that they must be ready to act if inflation or other risks materialize, suggesting that QE tapering discussions could begin in the coming months. The USD bulls seemed rather unaffected by the ongoing decline in the US Treasury bond yields, instead took cues from the prevalent risk-off mood.
Worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus continued weighing on investors' sentiment. This was evident from a sharp fall in the US equity futures, which was seen as another factor that benefitted the safe-haven greenback and acted as a tailwind for the USD/CAD pair.
Meanwhile, oil prices retreated further from the highest intraday level since November 2014 amid worries that the United Arab Emirates (UAE) will unilaterally ramp up its production following a clash with Saudi Arabia. It is worth recalling that the UAE stood against an extension of production curbs until the end of 2022 from the current deadline of April 2022. The uncertainty about how the OPEC+ stalemate will impact the future oil output continued weighing on the black gold.
Apart from this, Thursday's strong rally could further be attributed to some technical buying on a sustained move beyond the key 1.2500 psychological mark. Given that the USD/CAD pair this week confirmed a near-term breakout through a short-term descending trend-line resistance, the subsequent strength has set the stage for additional gains. Some follow-through buying beyond the 1.2560 horizontal barrier will reaffirm the constructive set-up and allow bulls to reclaim the 1.2600 mark.
Market participants now look forward to the release of the US Initial Weekly Jobless Claims data, due later during the early North American session. This, along with the broader market risk sentiment, will drive the USD demand and provide some impetus to the USD/CAD pair. The US economic docket also features the release of crude oil inventories data by the Energy Information Administration, which might influence oil price dynamics and allow traders to grab some short-term opportunities.
Technical levels to watch
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.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.