- A combination of factors prompted fresh selling around USD/CAD on Tuesday.
- The risk-on mood, retreating US bond yields weighed on the safe-haven buck.
- Bullish crude oil prices underpinned the loonie and contributed to the decline.
The intraday USD selling bias picked up pace in the last hour and dragged the USD/CAD pair back closer to mid-1.2300s during the first half of the European session.
Having faced rejection near the 1.2400 mark, the USD/CAD pair met with some fresh supply on Tuesday and for now, seems to have stalled its recent bounce from four-month lows touched last week. The downtick was sponsored by the emergence of fresh selling around the US dollar and a modest uptick in crude oil prices, which tend to underpin the commodity-linked loonie.
The dominant risk-on mood in the markets failed to assist the safe-haven USD to capitalize on the previous day's goodish rebound from one-month lows. Apart from this, a modest decline in the US Treasury bond yields undermined the greenback. That said, expectations for an early policy tightening by the Fed should limit the USD losses and lend support to the USD/CAD pair.
The Fed Chair Jerome Powell reaffirmed last Friday that the US central bank remains on track to begin tapering its bond purchases by the end of this year. Investors also seem convinced that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. This supports prospects for the emergence of some dip-buying around the USD.
Market participants now look forward to the US economic docket, featuring the releases of the Conference Board’s Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with the US bond yields and the broader market risk sentiment, will influence the USD. Traders will further take cues from oil price dynamics for some impetus 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
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.