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USD/CAD Daily Price Forecast – USD/CAD Stable Above 1.30 Handle On Hawkish FOMC Minutes Update

Colin First
Updated

The Canadian dollar continues to suffer a beating over the past two days as USD/CAD trades at the highs for the session. Weaker oil prices overnight was one of the factors weighing on the loonie alongside dollar strength from the hawkish Fed minutes and poor risk sentiment so far to begin the session isn’t really helping with the mood either. Surging oil prices look to be taking a bit of a breather at this point and with the dollar regaining some poise on the back of the Fed minutes yesterday, the stars are aligning for a move higher in the pair. Last week, the dollar suffered as the correlation between the greenback and risk broke down and as stocks recovered from the lows yesterday, so did the dollar but there’s also the added support from the hawkish Fed to add to that.

Loonie On Bear’s Path as Crude Oil Price Declines

Given that context, there will start to be more correlation moving forward between rising yields and dollar strength as markets look to price in more Fed rate hikes over time which will lend further support for the greenback over time. The USD/CAD pair has so far built on previous session’s strong upsurge and climbed to fresh weekly tops during the early European session, albeit retreated few pips thereafter. A combination of supporting factors assisted the pair to catch some aggressive bids on Wednesday and rebound sharply from over one-week lows set on Tuesday, recovering all of its losses recorded over the past two trading session. A sharp fall in crude oil prices, following the release of bearish EIA weekly US crude oil inventories data, weighed heavily on the commodity-linked currency – Loonie which has helped the pair remain in higher levels of yesterday’s price action.

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The pair jumped back above the key 1.3000 psychological mark and continued gaining positive traction for the second consecutive session, albeit once again stalled the positive momentum just ahead of the 100-day SMA barrier amid a modest USD retracement slide. Despite a fresh leg of an upsurge in the US Treasury bond yields, the greenback failed to capitalize on the early up-move and has now drifted slightly lower, which turned out to be the only factor keeping a lid on any further up-move for the major, at least for the time being. The 1.30 handle now seems to protect the immediate downside, which if broken might accelerate the fall back towards the 1.2960-55 support area. On the upside, the 100-day SMA, currently near the 1.3065 region remains an important barrier to clear, above which the pair seems all set to aim towards reclaiming the 1.3100 handle.

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This article was originally posted on FX Empire

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