- USD/CAD trimmed a part of its intraday gains and was pressured by a combination of factors.
- Modest uptick in crude oil prices underpinned the loonie and capped gains amid a weaker USD.
- The risk-off mood, aggressive Fed rate hike bets limited the USD losses and extended support.
The USD/CAD pair struggled to capitalize on its goodish bounce from a near three-week low set earlier this Tuesday and was seen trading below the 1.2800 mark heading into the North American session.
The impending European Union ban on Russian oil imports continued fueling concerns about tightening global supply. Adding to this, hopes for demand recovery in China assisted crude oil prices to reverse modest intraday losses. This, in turn, underpinned the commodity-linked loonie and acted as a headwind for the USD/CAD pair amid the emergence of fresh selling around the US dollar.
In fact, the key USD Index dropped to a nearly one-month low amid strong pickup in the shared currency, which gained traction in reaction to hawkish comments by the European Central Bank (ECB) policymakers. That said, the prevalent risk-off environment - amid the worsening global economic outlook - helped limit losses for the safe-haven buck and extended some support to the USD/CAD pair.
Investors remain worried that a more aggressive move by major central banks to curb soaring inflation could pose challenges to the global economy. Adding to this, the Russia-Ukraine war and the latest COVID-19 outbreak in China have been fueling recession fears. This, in turn, kept a lid on the overnight optimistic move in the markets and benefitted traditional safe-haven assets.
Apart from this, expectations that the US central bank would need to take more drastic action to bring inflation under control held back traders from placing aggressive USD bearish bets. Hence, the focus will remain glued to Fed Chair Jerome Powell's speech later during the early North American session and the latest FOMC meeting minutes, scheduled for release on Wednesday.
A 50 bps Fed rate hike move over the next two meetings is already priced in, suggesting that market participants will look for clues about the possibility of a jumbo 75 bps rate hike in June. This, in turn, will play a key role in driving the USD demand in the near term and assist traders to determine the next leg of a directional move for the USD/CAD pair.
In the meantime, traders will take cues from the US economic docket - featuring the releases of the flash PMI prints for May, New Home Sales and Richmond Manufacturing Index. This, along with the broader market risk sentiment, will drive the USD demand. Apart from this, oil price dynamics should allow traders to grab short-term opportunities around the USD/CAD pair.
Technical levels to watch
|Today last price||1.2793|
|Today Daily Change||0.0026|
|Today Daily Change %||0.20|
|Today daily open||1.2767|
|Previous Daily High||1.285|
|Previous Daily Low||1.2766|
|Previous Weekly High||1.2982|
|Previous Weekly Low||1.2776|
|Previous Monthly High||1.288|
|Previous Monthly Low||1.2403|
|Daily Fibonacci 38.2%||1.2799|
|Daily Fibonacci 61.8%||1.2818|
|Daily Pivot Point S1||1.2739|
|Daily Pivot Point S2||1.2711|
|Daily Pivot Point S3||1.2655|
|Daily Pivot Point R1||1.2822|
|Daily Pivot Point R2||1.2878|
|Daily Pivot Point R3||1.2906|
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.