- A combination of supportive factors help USD/CAD regain positive traction on Friday.
- Expectations of an aggressive rate hike from the Fed and cautious sentiment in the markets push the dollar to a new 20-year high.
- Recession fears cap oil prices, weighing on the CAD and providing support for the pair.
- Investors now await the publication of the monthly report on employment in the United States and Canada.
The pair USD/CAD has attracted fresh buying near 1.2950 on Friday and has continued to rise during the first half of the European session. The pair has reversed much of the previous day’s losses and is now trading above the psychological level of 1.3000.
After the brief pause the day before, the US dollar was once again in demand and soared to a new two-decade high amid the prospects for a faster rate hike by the Fed. Market expectations were bolstered by the June 14-15 FOMC meeting minutes, released on Wednesday, indicating that another rate hike of 50 or 75 basis points is likely at the July meeting. Apart of this, cautious sentiment in the markets also benefited the US dollar as a safe havenwhich in turn helped the USD/CAD pair regain positive traction on the last day of the week.
Market sentiment remains fragile amid concerns that rapidly rising interest rates and tightening financial conditions pose challenges to global growth. Also, the ongoing war between Russia and Ukraine and the latest outbreak of COVID-19 in China have fueled recession fears. Meanwhile, the worsening economic outlook has raised concerns about the recovery in fuel demand. This, in turn, acted as a headwind for crude oil prices, weighing on the CADa currency linked to commodity prices, and provided an additional boost to the USD/CAD pair.
It will now be interesting to see if the bulls are able to maintain their dominant position or refrain from opening new positions ahead of Friday’s release of monthly employment data for the United States and Canada. The popularly known NFP report could instill some volatility in the financial markets and boost the demand for the dollar. Also, investors will follow the dynamics of oil prices to take advantage of some short-term opportunities around the USD/CAD pair.
USD/CAD technical levels
Source: Fx Street
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