- A combination of factors exerted some pressure on USD/CAD for the second straight day.
- The recent bullish run in oil prices continued underpinning the loonie and capped gains.
- Sliding US bond yields weighed on the USD and further contributed to the softer tone.
- Investors now eye a slew of US macro data for some trading impetus ahead of the FOMC.
The USD/CAD pair remained on the defensive through the early European session and was last seen hovering near two-day lows, around the 1.2135 region.
The pair edged lower for the second straight session on Tuesday and retreated further from one-month tops, around the 1.2175-80 region touched last week. The recent strong bullish run in crude oil prices continued underpinning the commodity-linked loonie. This, along with a subdued US dollar demand, exerted some pressure on the USD/CAD pair.
The continuous improvement of the coronavirus situation in the United States and much of Europe has been fueling optimism for a strong recovery in the fuel demand. This, in turn, pushed the commodity to the highest level since October 2018. That said, the prospect of extra supply coming to the market soon from Iran capped any further gains.
On the other hand, the USD was pressured by a fresh leg down in the US Treasury bond yields. However, expectations of a slightly less dovish Fed – amid worries about rising inflationary pressure – should help put a tentative floor under the greenback. This should limit any meaningful slide for the USD/CAD pair, at least for the time being.
Investors might also be reluctant to place any aggressive bets ahead of the highly-anticipated FOMC monetary policy decision on Wednesday. This further makes it prudent to wait for some follow-through selling before confirming that the recent bounce from the vicinity of the key 1.2000 psychological mark, or multi-year lows has already run out of steam.
Traders now look forward to the US economic docket – featuring the release of Retail Sales, Producer Price Index (PPI), Empire State Manufacturing Index and Industrial Production data. This, along with the US bond yields, might influence the USD. Apart from this, oil price dynamics should produce some trading opportunities around the USD/CAD pair.
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
AUD/USD risks a deeper drop in the short term
AUD/USD rapidly left behind Wednesday’s decent advance and resumed its downward trend on the back of the intense buying pressure in the greenback, while mixed results from the domestic labour market report failed to lend support to AUD.
EUR/USD leaves the door open to a decline to 1.0600
A decent comeback in the Greenback lured sellers back into the market, motivating EUR/USD to give away the earlier advance to weekly tops around 1.0690 and shift its attention to a potential revisit of the 1.0600 neighbourhood instead.
Gold is closely monitoring geopolitics
Gold trades in positive territory above $2,380 on Thursday. Although the benchmark 10-year US Treasury bond yield holds steady following upbeat US data, XAU/USD continues to stretch higher on growing fears over a deepening conflict in the Middle East.
Bitcoin price shows strength as IMF attests to spread and intensity of BTC transactions ahead of halving
Bitcoin (BTC) price is borderline strong and weak with the brunt of the weakness being felt by altcoins. Regarding strength, it continues to close above the $60,000 threshold for seven weeks in a row.
Is the Biden administration trying to destroy the Dollar?
Confidence in Western financial markets has already been shaken enough by the 20% devaluation of the dollar over the last few years. But now the European Commission wants to hand Ukraine $300 billion seized from Russia.