USD/CAD refreshes multi-week low amid bullish oil prices, eyeing 1.2600 ahead of BoC

A combination of factors dragged USD/CAD to a three-week low on Wednesday.
Crude oil shot back above the $72.00/barrel mark and underpinned the loonie.
Retreating US bond yields weighed on the USD and contributed to the downtick.
Investors now look forward to the BoC policy decision for a fresh trading impetus.

Haresh Menghani FXStreet

The USD/CAD pair reversed an early European session uptick and dropped to a near three-week low, around the 1.2625-20 region in the last hour.

The pair struggled to capitalize on its attempted recovery, instead met with a fresh supply near the 1.2665 area and turned lower for the third successive day on Wednesday. Crude oil prices reversed an intraday dip and climbed back above the $72.00/barrel mark easing concerns about the impact of the new coronavirus variant on the global fuel demand. This, in turn, underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair.

On the other hand, the US dollar was pressured by retreating US Treasury bond yields and a generally positive risk tone. This was seen as another factor that contributed to the USD/CAD pair's modest intraday downtick. That said, a combination of factors acted as a tailwind for the greenback and should help limit the downside for the USD/CAD pair. This warrants some caution for aggressive bearish traders and before positioning for any further downfall.

Investors seem convinced that the Fed would tighten its monetary policy sooner rather than later to contain stubbornly high inflation. In fact, the money markets indicate a high possibility for an eventual liftoff in May 2022. Hence, the market focus will remain glued to Friday's release of the latest US consumer inflation figures. The CPI report will drive the USD demand in the near term and provide a fresh directional impetus to the USD/CAD pair.

Traders also seemed reluctant, rather preferred to wait on the sidelines ahead of the Bank of Canada monetary policy meeting. The outcome is scheduled to be announced later during the early North American session. This, along with oil price dynamics, will influence the Canadian dollar and produce some meaningful trading opportunities around the USD/CAD pair amid absent relevant market moving economic releases.

Technica levels to watch

USD/CAD

Overview
Today last price	1.2622
Today Daily Change	-0.0026
Today Daily Change %	-0.21
Today daily open	1.2648

Trends
Daily SMA20	1.2672
Daily SMA50	1.2541
Daily SMA100	1.2579
Daily SMA200	1.2477

Levels
Previous Daily High	1.2767
Previous Daily Low	1.2635
Previous Weekly High	1.2846
Previous Weekly Low	1.2713
Previous Monthly High	1.2837
Previous Monthly Low	1.2352
Daily Fibonacci 38.2%	1.2686
Daily Fibonacci 61.8%	1.2717
Daily Pivot Point S1	1.26
Daily Pivot Point S2	1.2552
Daily Pivot Point S3	1.2468
Daily Pivot Point R1	1.2732
Daily Pivot Point R2	1.2815
Daily Pivot Point R3	1.2863

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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