- USD/CAD oscillated in a narrow trading band through the first half of the European session.
- Softer crude oil prices undermined the loonie and extended some support to the major.
- Modest USD weakness acted as a headwind and kept a lid on any meaningful gains.
The USD/CAD pair lacked any firm intraday direction and seesawed between tepid gains/minor losses, around the 1.2700 mark through the first half of the European session.
A combination of diverging forces failed to assist the USD/CAD pair to capitalize on the previous day's bounce from the 1.2450 area and led to subdued/range-bound price action on Wednesday. Expectations that the revival of an international nuclear agreement could return more than 1 million barrels per day of Iranian oil in the markets weighed on crude oil prices. This, in turn, undermined the commodity-linked loonie and acted as a tailwind for the major, though modest US dollar weakness capped the upside, at least for the time being.
A softer tone surrounding the US Treasury bond yields turned out to be a key factor that kept the USD bulls on the defensive. That said, speculations for a faster policy tightening by the Fed should limit the downside for the US bond yields. Investors seem convinced that the Fed would adopt a more aggressive policy response to combat stubbornly high inflation and have been pricing in the possibility of a 50 bps Fed rate hike in March. This supports prospects for the emergence of some USD dip-buying, which should extend support to the USD/CAD pair.
Bulls, however, seemed reluctant to place aggressive bets and preferred to wait on the sidelines ahead of the release of the latest US consumer inflation figures on Thursday. In the meantime, the US bond yields will continue to play a key role in influencing the USD amid absent relevant market moving economic releases. This, along with oil price dynamics, should provide some impetus to the USD/CAD pair and allow traders to grab 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 edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.