- A combination of factors prompted fresh selling around USD/CAD on Thursday.
- Bullish oil prices, strong Canadian CPI print continued underpinning the loonie.
- The risk-on mood weighed on the safe-haven USD and did little to lend support.
- Rising US bond yields acted as a tailwind for the USD and could help limit losses.
The USD/CAD pair edged lower through the early European session and dropped to a fresh daily low, around the 1.2480 region in the last hour.
The pair struggled to capitalize on the previous day's goodish rebound from mid-1.2400s, or over two-month low and met with a fresh supply near the 1.2525 area on Thursday. The recent bullish run-up in oil prices, along with Wednesday's stronger Canadian CPI report underpinned the commodity-linked loonie and acted as a headwind for the USD/CAD pair.
In fact, strong demand and short-term supply disruptions pushed crude oil prices to the highest level since late 2014 earlier this week. Moreover, Canada’s annual inflation rate reached a three-decade high in December, which fueled speculations that the Bank of Canada could increase rates as early as next week and further benefitted the Canadian dollar.
On the other hand, a strong recovery in the risk sentiment weighed on the safe-haven US dollar and did little to lend any support to the USD/CAD pair. That said, a fresh leg up in the US Treasury bond yields, bolstered by the prospects for an eventual Fed lift-off in March, should limit the downside for the greenback and the USD/CAD pair, at least for now.
Even from a technical perspective, bulls have been showing some resilience near the mid-1.2400s, which should now act as a pivotal point for traders. Market participants now look forward to the US economic docket – featuring the releases of Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and Existing Home Sales data – for a fresh impetus.
This, along with the US bond yields and the broader market risk sentiment, will influence the buck. Apart from this, traders will take cues from oil price dynamics for some short-term opportunities around the USD/CAD pair. The key focus, however, will remain on next week's central bank event risks – the FOMC and the BoC policy decision on Wednesday.
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 regains traction, recovers above 1.0700
EUR/USD regained its traction and turned positive on the day above 1.0700 in the American session. The US Dollar struggles to preserve its strength after the data from the US showed that the economy grew at a softer pace than expected in Q1.
GBP/USD returns to 1.2500 area in volatile session
GBP/USD reversed its direction and recovered to 1.2500 after falling to the 1.2450 area earlier in the day. Although markets remain risk-averse, the US Dollar struggles to find demand following the disappointing GDP data.
Gold holds around $2,330 after dismal US data
Gold fell below $2,320 in the early American session as US yields shot higher after the data showed a significant increase in the US GDP price deflator in Q1. With safe-haven flows dominating the markets, however, XAU/USD reversed its direction and rose above $2,340.
XRP extends its decline, crypto experts comment on Ripple stablecoin and benefits for XRP Ledger
Ripple extends decline to $0.52 on Thursday, wipes out weekly gains. Crypto expert asks Ripple CTO how the stablecoin will benefit the XRP Ledger and native token XRP.
After the US close, it’s the Tokyo CPI
After the US close, it’s the Tokyo CPI, a reliable indicator of the national number and then the BoJ policy announcement. Tokyo CPI ex food and energy in Japan was a rise to 2.90% in March from 2.50%.