- USD/CAD attracts some intraday selling on Tuesday, though the downside remains limited.
- An uptick in Oil prices underpins the Loonie and exerts pressure amid renewed USD selling.
- Hawkish Fed expectations warrant caution before positioning for any meaningful decline.
The USD/CAD pair attracts fresh sellers following an intraday uptick to mid-1.3800s and drops to a fresh daily low during the first half of the European session. Spot prices, however, manage to hold above the 1.3800 round figure and seem poised to prolong over a three-week-old uptrend.
A modest uptick in Crude Oil prices is seen underpinning the commodity-linked Loonie. Apart from this, a generally positive tone around the equity markets drags the safe-haven US Dollar (USD) to a one-week low, which, in turn, is seen exerting some pressure on the USD/CAD pair. Any meaningful corrective decline, however, still seems elusive ahead of the key central bank event risk – the outcome of the highly-anticipated two-day FOMC monetary policy meeting starting this Tuesday.
The Federal Reserve (Fed) is scheduled to announce its decision on Wednesday and is widely anticipated to keep its benchmark interest rate steady in the range of 5.25%-5.50%, or the highest in 22 years. That said, the US economic resilience, along with still sticky inflation, should allow the US central bank to keep the door open for one more rate hike in 2023. The hawkish outlook remains supportive of elevated US Treasury bond yields, which should lend support to the buck and the USD/CAD pair.
Furthermore, investors remain concerned about the worsening economic conditions in China – the world's top oil importer. This, along with worries that headwinds stemming from rapidly rising borrowing costs could dent fuel demand, keeps a lid on any meaningful upside for Crude Oil prices. Apart from this, the Bank of Canada (BoC) Governor Tiff Macklem's dovish signal last week, indicating that interest rates may have peaked, should contribute to limiting the downside for the USD/CAD pair.
Next on tap is the US economic docket – featuring the release of the Chicago PMI and the Conference Board's Consumer Confidence Index later during the early North American session. Apart from this, the US bond yields will drive the USD demand, which, along with Oil price dynamics, should provide some impetus to the USD/CAD pair. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside.
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 ranges above 1.0750 amid a steady US Dollar
EUR/USD is trading sideways above 1.0750 in early Europe on Monday. The pair defends bids amid a modest risk-recovery and sluggish US bond yields. The US Dollar is struggling for upside traction, as traders refrain from placing fresh bets ahead of Tuesday's US inflation data.
GBP/USD treads water near 1.2550, as focus shifts to key UK/US data
GBP/USD is holding steady near 1.2550, lacking a clear directional bias in European morning on Monday. The pair is struggling amid investors' caution ahead of key economic data and central banks' meetings from the US and the UK this week.
Gold price hangs near two-week low, with eyes on critical US data/ Fed
Gold price remains under some selling pressure for the second successive day on Monday. Reduced bets for a March Fed rate cut move and a modest USD uptick weigh on the metal. Geopolitical risks could help limit further losses ahead of this week’s key data/event risks.
Ripple plunges alongside altcoins in marketwide crash, Galaxy CEO admits XRP Army is real
The SEC v. Ripple lawsuit is making headlines again as pro-XRP attorney John Deaton criticizes former SEC Chair Jay Clayton for his comments on the court ruling. Clayton believes that the initial issuance of XRP tokens was a securities transaction in the capital raising phase.
Central stage: The big three central banks in focus
As we approach the end of the year, this week holds particular significance for macro observers. The three major central banks, often referred to as the "Big 3" – the Federal Reserve, the European Central Bank (ECB), and the Bank of England (BoE) – are all scheduled to convene.