- USD/CAD pulls back a bit after rising to a seven-month high earlier this Thursday.
- Weaker Crude Oil prices and a bullish USD supports prospects for additional gains.
- Traders now look to the US Q3 GDP and other US macro data for a fresh impetus.
The USD/CAD pair retreats a few pips from its highest level since March touched during the early part of the European session and currently trades just below the 1.3800 mark, unchanged for the day.
The intraday pullback could be attributed to some profit-taking, especially after a strong rally of over 150 pips from the weekly low, around the 1.3660 region touched on Tuesday and ahead of important US economic data. The downside, however, remains cushioned in the wake of the underlying bullish sentiment surrounding the US Dollar (USD) and a modest downtick in Crude Oil prices, which tends to undermine the commodity-linked Loonie.
Growing acceptance that the Federal Reserve (Fed) will stick to its hawkish stance and keep interest rates higher for longer remains supportive of elevated US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond climbs back closer to a 16-year peak, around the 5% threshold breached earlier this week. Apart from this, the risk-off mood benefits the safe-haven buck, which, in turn, is lending support to the USD/CAD pair.
Against the backdrop of concerns that the raging Israel-Hamas war could spill over to the wider Middle East region, worries about economic headwinds stemming from rapidly rising borrowing costs temper investors' appetite for riskier assets. The looming recession risk, meanwhile, raises doubts over a strong global fuel demand and weighs on Crude Oil prices. This, along with the Bank of Canada's (BoC) relatively dovish outlook, undermines the Canadian Dollar.
The Canadian central bank held its benchmark interest rates unchanged at a 22-year high of 5.0% for the second straight month in light of a slowing economy and lowered its 2023 growth estimate to 1.2% from 1.8% in July. The BoC, meanwhile, sees inflation staying above the 2% target and averaging around 3.5% through mid-2024. This left the door open for more rate hikes, which, in turn, is seen holding back bulls from placing fresh bets around the USD/CAD pair.
Investors also prefer to wait on the sidelines ahead of Thursday's key US macro releases – the Advance Q3 GDP print. This will be accompanied by Durable Goods Orders and the usual Weekly Initial Jobless Claims, followed by Pending Home Sales data. This, along with Fed Governor Christopher Waller's scheduled speech, will influence the USD demand. Apart from this, Oil price dynamics should provide short-term trading impetus to 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
AUD/USD hovers around 0.6670, trades on sentiment
The Australian Dollar trimmed losses against its American rival, as US indexes trimmed inflation-inspired losses. Australian Consumer Inflation Expectations stand out in the Asian session.
EUR/USD remains depressed near 1.1020
The EUR/USD pair flirted with the 1.1000 level after US inflation data cooled hopes for an aggressive Federal Reserve rate cut. The European Central Bank will announce its decision on monetary policy on Thursday.
Gold reconquered $2,510, aims to retest record highs
Gold touches the top of its range and then falls back down to $2,500 after the release of US inflation data on Wednesday. The benchmark 10-year US Treasury bond yield rebounds on stronger-than-forecast monthly core CPI print and drags XAU/USD lower.
XRP corrects 3% after Ripple CTO says Ledger does not have smart contract functionality
Ripple (XRP) has plans to introduce smart contract functionality to its native blockchain, the XRP Ledger. However, as of September 11 the firm has not announced a date for its launch on the mainnet.
Five Fundamentals for the week: Jittery markets fear the ECB, US inflation and more Premium
Is there still a chance? Investors hope for a 50-bps rate cut from the Fed but also fear a global recession is underway. The world's three largest economies, the US, China, and the eurozone, are set to rock global markets.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.