USD/CAD hangs near multi-year lows, below 1.2100 mark ahead of US CPI

USD/CAD has been struggling to register any meaningful recovery from multi-year lows.
Hawkish BoC, bullish oil prices continued underpinning the loonie and capped the upside.
A modest USD rebound might help limit the downside ahead of the critical US CPI report.

Haresh Menghani FXStreet

The USD/CAD pair edged lower through the first half of the European session and dropped to fresh daily lows, around the 1.2085-80 region in the last hour.

The pair continued with its struggle to register any meaningful recovery and has been oscillating in a range since the beginning of this week, consolidating its recent fall to near four-year lows. The divergence in monetary policies adopted by the Bank of Canada and the Federal Reserve was seen as a key factor that continued acting as a headwind for the USD/CAD pair.

The BoC reduced its weekly asset purchases at the April policy meeting and brought forward the guidance for the first interest rate hike to the second half of 2022. Apart from this, the underlying bullish tone in crude oil prices further underpinned the commodity-linked loonie. This, in turn, kept a lid on the USD/CAD pair's attempted recovery earlier this Wednesday.

On the other hand, the prevalent risk-off mood benefitted the safe-haven US dollar, though failed to lend support to the USD/CAD pair. The global risk sentiment took a hit amid escalating conflict between Israel and Palestine. Adding to this, speculations that rising inflation might force the Fed to hike rates earlier than anticipated further dented investors' confidence.

Hence, the market focus will be squarely on the latest US consumer inflation figures, due for release later during the early North American session. The data will give investors a better idea of where inflation is headed amid the recent surge in commodity prices amid worries that maybe inflation is something more than the Fed's view of being transitory.

This, in turn, will influence market expectations over the Fed's policy outlook, which will play a key role in driving the greenback in the near term. Traders might further take cues from the EIA's weekly US crude oil inventories report. Apart from this, the broader market risk sentiment might further contribute to producing some trading opportunities around the USD/CAD pair.

Technical levels to watch

USD/CAD

Overview
Today last price	1.2086
Today Daily Change	-0.0016
Today Daily Change %	-0.13
Today daily open	1.2102

Trends
Daily SMA20	1.2361
Daily SMA50	1.2482
Daily SMA100	1.2602
Daily SMA200	1.2861

Levels
Previous Daily High	1.2126
Previous Daily Low	1.2078
Previous Weekly High	1.2352
Previous Weekly Low	1.2122
Previous Monthly High	1.2654
Previous Monthly Low	1.2266
Daily Fibonacci 38.2%	1.2108
Daily Fibonacci 61.8%	1.2097
Daily Pivot Point S1	1.2078
Daily Pivot Point S2	1.2054
Daily Pivot Point S3	1.203
Daily Pivot Point R1	1.2126
Daily Pivot Point R2	1.215
Daily Pivot Point R3	1.2174

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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