- USD/CAD consolidates its recent strong recovery gains to over a one-week high.
- Tumbling Crude Oil prices undermines the Loonie and lends support to the pair.
- A modest USD downtick caps the upside, though the setup favours bullish traders.
The USD/CAD pair now seems to have entered a bullish consolidation phase and is seen oscillating in a narrow range around the 1.3470-1.3475 region, or over a one-week high touched this Wednesday.
Crude Oil prices tumble to a fresh monthly low amid worries that rising borrowing costs will slow economic growth and dent fuel demand. Apart from this, signs of cooling consumer inflation in Canada undermine the commodity-linked Lonie and assist the USD/CAD pair to build on the recent solid rebound from the 1.3300 mark, or a two-month low touched earlier this week. The upside, however, remains capped in the wake of a mildly softer tone surrounding the US Dollar, led by a modest downtick in the US Treasury bond yields.
That said, the prospects for further policy tightening by the Federal Reserve (Fed) should act as a tailwind for the US bond yields and limit the downside for the USD, at least for the time being. The markets now seem convinced that the US central bank will lift rates by 25 bps at the next policy meeting in May and have been pricing in a small chance of another rate hike in June. The bets were reaffirmed by the recent hawkish comments by several Fed officials and a rise in short-term inflation expectations, which, in turn, favours the USD bulls.
In fact, the Fed’s Beige Book released on Wednesday showed that US inflation continued to run relatively high. Furthermore, the incoming US macro data pointed to a resilient economy and fueled concerns that the Fed may have more work to do amid easing fears of a full-blown banking crisis. Apart from this, a generally weaker tone around the equity markets is seen as another factor benefitting the Greenback's relative safe-haven assets, reaffirming the positive outlook and suggesting that the path of least resistance for the USD/CAD pair is to the upside.
Market participants now look to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claim, the Philly Fed Manufacturing Index and Existing Home Sales data later during the early North American session. This, along with speeches by influential FOMC members, the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from Oil price dynamics and the Bank of Canada (BoC) Governor Tiff Macklem's scheduled speech.
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 stays in positive territory above 1.0850 after US data
EUR/USD clings to modest daily gains above 1.0850 in the second half of the day on Friday. The improving risk mood makes it difficult for the US Dollar to hold its ground after PCE inflation data, helping the pair edge higher ahead of the weekend.
GBP/USD stabilizes above 1.2850 as risk mood improves
GBP/USD maintains recovery momentum and fluctuates above 1.2850 in the American session on Friday. The positive shift seen in risk mood doesn't allow the US Dollar to preserve its strength and supports the pair.
Gold rebounds above $2,380 as US yields stretch lower
Following a quiet European session, Gold gathers bullish momentum and trades decisively higher on the day above $2,380. The benchmark 10-year US Treasury bond yield loses more than 1% on the day after US PCE inflation data, fuelling XAU/USD's upside.
Avalanche price sets for a rally following retest of key support level
Avalanche (AVAX) price bounced off the $26.34 support level to trade at $27.95 as of Friday. Growing on-chain development activity indicates a potential bullish move in the coming days.
The election, Trump's Dollar policy, and the future of the Yen
After an assassination attempt on former President Donald Trump and drop out of President Biden, Kamala Harris has been endorsed as the Democratic candidate to compete against Trump in the upcoming November US presidential election.