USD/CAD slides further below 1.2800 amid rallying oil prices, softer USD
- USD/CAD met with a fresh supply on Thursday and turned lower for the second straight day.
- A fresh leg up in oil prices underpinned the loonie and exerted downward pressure on the pair.
- The post-ECB buying around the euro weighed on the USD and contributed to the selling bias.
- Mostly in-line US CPI, the risk-off impulse should help limit losses for the buck and the major.
The USD/CAD pair edged lower through the early North American session and dropped to a three-day low, around the 1.2780 region in the last hour.
The pair struggled to preserve its intraday gains, instead met with a fresh supply near the 1.2840 region on Thursday and drifted into the negative territory for the second successive day. The lack of progress in the Russia-Ukraine ceasefire talks triggered a fresh leg up in crude oil prices. This, in turn, underpinned the commodity-linked loonie and was seen as a key factor that exerted downward pressure on the USD/CAD pair.
On the other hand, the post-ECB buying around the shared currency dragged the US dollar to a one-week low and further contributed to the pair's intraday decline. That said, a fresh wave of the global risk-aversion trade acted as a tailwind for the safe-haven US dollar, which was further supported by mostly in-line US consumer inflation figures. This could extend some support to the USD/CAD pair and help limit any deeper losses.
In fact, the US Bureau of Labor Statistics reported that the headline US CPI accelerated to a new 40-year high level of 7.9% in February. The monthly print also matched consensus estimates and rose 0.8% during the reported month from the 0.6% recorded in January. Meanwhile, core inflation, which excludes food and energy prices, eased a bit to 0.5% in February from the 0.6% previous, though the yearly rate climbed to 6.4% from 6.0% in January.
The data added to worries about a major inflationary shock, which was evident from an intraday uptick in the US Treasury bond yields. Apart from this, the rapidly deteriorating global economic outlook and the worsening situation in Ukraine should revive demand for the USD. This, in turn, supports prospects for the emergence of fresh buying around the USD/CAD pair.
Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have topped near the 1.2900 round-figure mark and placing fresh bearish bets around the USD/CAD pair. With Thursday's key data out of the way, the focus shifts back to developments surrounding the Russia-Ukrain saga, which should continue to infuse volatility in the FX market.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
