USD/CAD remains depressed near daily low, around 1.3400 mark amid weaker USD
- USD/CAD meets with a fresh supply on Thursday and is pressured by a combination of factors.
- Retreating US bond yields and the risk-on impulse weigh heavily on the safe-haven greenback.
- The recent rally in oil prices underpins the Loonie and also contributes to the intraday decline.
The USD/CAD pair comes under some renewed selling pressure following an early uptick to the 1.3460 area and reverses a part of the previous day's solid bounce of around 100 pips from the weekly low. The pair remains depressed through the first half of the European session and is currently placed near the daily low, with bears awaiting a break below the 1.3400 mark.
A combination of factors triggers a sharp US Dollar retracement slide from a one-month high, which, in turn, is seen exerting downward pressure on the USD/CAD pair. The uncertainty over the Fed's rate-hike path drags the US Treasury bond yields higher. This, along with a goodish recovery in the global risk sentiment - as depicted by a generally positive tone around the equity markets - weighs heavily on the safe-haven greenback.
Meanwhile, crude oil prices hold steady near a one-week top amid optimism over a strong fuel demand recovery in China. This, in turn, underpins the commodity-linked Loonie and further contributes to the offered tone surrounding the USD/CAD pair. That said, worries about a deeper global economic downturn could cap the upside for the black liquid. Apart from this, the divergent Fed-BoC policy outlook should limit losses for the major.
Fed Chair Jerome Powell acknowledged on Tuesday that rates might need to move higher than expected if the economy remains strong. A slew of FOMC members echoed Powell's hawkish view that additional rate hikes were likely warranted to fully gain control of inflation. The Bank of Canada (BoC), on the other hand, is expected to be the first major central bank to pause the policy-tightening cycle following eight rate hikes in the past 11 months.
The aforementioned fundamental backdrop supports prospects for the emergence of some dip-buying around the USD/CAD pair, warranting some caution before positioning for any further losses. Traders now look to the release of the US Weekly Initial Jobless Claims data, which, along with the broader risk sentiment, might influence the USD. Apart from this, oil price dynamics could further contribute to producing short-term opportunities around the pair.
Technical levels to watch