USD/CAD refreshes three-week high on modest USD strength, bullish Oil prices cap gains

USD/CAD scales higher for the second straight day and hits a three-week high on Thursday.
The Fed’s hawkish outlook, along with a softer risk tone, benefits the USD and lend support.
Bullish Crude Oil prices could underpin the Loonie and cap gains ahead of the US macro data.

Haresh Menghani FXStreet

The USD/CAD pair attracts some buying for the second straight day on Thursday and touches a fresh three-week high during the Asian session, which bulls now awaiting a sustained move beyond the 1.33000 mark before placing fresh bets.

The US Dollar (USD) adds to its weekly gains and remains well supported by the Federal Reserve's (Fed) hawkish outlook, which, in turn, is seen as a key factor acting as a tailwind for the USD/CAD pair. The US central bank, at its June policy meeting, opted for a pause to assess the impact of 10 previous rate hikes, though the minutes released Wednesday indicated a greater likelihood of further policy tightening. In fact, almost all members supported resuming rate hikes at a future meeting as inflation remains unacceptably high.

The prospects for further policy tightening by the Fed led to the overnight sharp rise in the US Treasury bond yields, which, along with a generally weaker risk tone, further benefit the safe-haven Greenback. The disappointing release of services data from China on Wednesday exacerbated worries about a global economic downturn. Apart from this, the potential risk of a further escalation in a trade conflict between China and the US - the world’s largest economies - tempers investors' appetite for perceived riskier assets.

China introduced export curbs on two metals - widely used in semiconductors, electric vehicles and high-tech industries - to the US. The abrupt move is viewed as a response to efforts by the US to curtail China's technological advancements and might cause more disruption to global trade. This takes its toll on the global risk sentiment and drives some haven flows towards the buck. That said, bullish Crude Oil prices underpin the commodity-linked Loonie and could act as a headwind for the USD/CAD pair, at least for the time being.

Market participants now look forward to the US economic docket - featuring the ADP report on private-sector employment, the usual Weekly Initial Jobless Claims, the ISM Services PMI and JOLTS Job Openings data. Apart from this, the US bond yields and the broader risk sentiment will drive the USD demand. This, along with Crude Oil price dynamics, should contribute to producing short-term trading opportunities around the USD/CAD pair ahead of the critical monthly jobs data from Canada and the US, due for release on Friday.

Technical levels to watch

USD/CAD

Overview
Today last price	1.3292
Today Daily Change	0.0011
Today Daily Change %	0.08
Today daily open	1.3281

Trends
Daily SMA20	1.3247
Daily SMA50	1.3402
Daily SMA100	1.3491
Daily SMA200	1.3507

Levels
Previous Daily High	1.3293
Previous Daily Low	1.322
Previous Weekly High	1.3285
Previous Weekly Low	1.3117
Previous Monthly High	1.3585
Previous Monthly Low	1.3117
Daily Fibonacci 38.2%	1.3265
Daily Fibonacci 61.8%	1.3248
Daily Pivot Point S1	1.3236
Daily Pivot Point S2	1.3192
Daily Pivot Point S3	1.3163
Daily Pivot Point R1	1.3309
Daily Pivot Point R2	1.3338
Daily Pivot Point R3	1.3382

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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