- A combination of factors dragged USD/CAD lower for the second successive day.
- The Ukraine crisis acted as a tailwind for the loonie and exerted some pressure.
- Modest USD weakness further contributed to offered tone surrounding the pair.
- Hawkish Fed expectations should limit the USD downside and lend some support.
The USD/CAD pair increased intraday losses during the early European session and dropped to a four-day low, around mid-1.2400s.
The pair struggled to capitalize on its early uptick, instead met with a fresh supply in the vicinity of the 1.2500 psychological mark and turned lower for the second straight day on Tuesday. The prospect of more Western sanctions on Russia over its alleged war crimes in Ukraine and stalled Iran nuclear deal fueled concerns about tighter global supply. This, in turn, continued acting as a tailwind for crude oil prices, which benefitted the commodity-linked loonie and exerted downward pressure on the USD/CAD pair.
On the other hand, signs of stability in the financial markets failed to assist the safe-haven US dollar to build on its gains over the past three trading sessions. This was another factor that dragged the USD/CAD pair back closer to the YTD low touched last week. Growing acceptance that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation should help limit losses for the buck. This, in turn, warrants some caution for aggressive bearish traders.
It is worth recalling that the markets have been pricing in a 100 bps Fed rate hike move over the next two meetings. Hence, the focus will remain glued to the FOMC monetary policy meeting minutes, due later during the US session. The US ISM Services PMI would drive the USD demand and provide some impetus to the USD/CAD pair ahead of the key PMI release would drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from developments surrounding the Russia-Ukraine saga, which will influence oil price dynamics and produce some short-term opportunities.
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 retreats toward 1.0850 on modest USD recovery
EUR/USD stays under modest bearish pressure and trades in negative territory at around 1.0850 after closing modestly lower on Thursday. In the absence of macroeconomic data releases, investors will continue to pay close attention to comments from Federal Reserve officials.
GBP/USD holds above 1.2650 following earlier decline
GBP/USD edges higher after falling to a daily low below 1.2650 in the European session on Friday. The US Dollar holds its ground following the selloff seen after April inflation data and makes it difficult for the pair to extend its rebound. Fed policymakers are scheduled to speak later in the day.
Gold climbs to multi-week highs above $2,400
Gold gathered bullish momentum and touched its highest level in nearly a month above $2,400. Although the benchmark 10-year US yield holds steady at around 4.4%, the cautious market stance supports XAU/USD heading into the weekend.
Chainlink social dominance hits six-month peak as LINK extends gains
Chainlink (LINK) social dominance increased sharply on Friday, exceeding levels seen in the past six months, along with the token’s price rally that started on Wednesday.
Week ahead: Flash PMIs, UK and Japan CPIs in focus – RBNZ to hold rates
After cool US CPI, attention shifts to UK and Japanese inflation. Flash PMIs will be watched too amid signs of a rebound in Europe. Fed to stay in the spotlight as plethora of speakers, minutes on tap.