- USD/CAD reverses an intraday decline and is supported by a combination of factors.
- A sharp pullback in oil prices undermines the loonie and acts as a tailwind.
- A modest bounce in the dollar from the daily low contributes to the intraday rise.
- The pullback in US bond yields and the risk-on mood could weigh on the dollar and the pair.
The USD/CAD pair rebounds a few pips from the daily low and breaks back above the key psychological 1.3000 level ahead of the Wall Street open.
Oil prices pull back sharply from one-month highs reached earlier on Tuesday, amid concerns that a deeper global economic slowdown will hit fuel demand. In addition, hopes that Iranian oil exports, which have been sanctioned, will resume overshadow expectations that major oil producers may cut output and weigh on the black liquid. This, in turn, undermines the commodity-linked loonie and helps the USD/CAD pair attract some downside buying near the 1.2970 region.
Elsewhere, the US dollar trims some of its modest intraday losses and further contributes to the USD/CAD pair’s intraday rebound. The growing acceptance that the Fed will continue to tighten policy at a faster pace turns out to be a key factor acting as a tailwind for the dollar. That said, a further decline in US Treasury yields, coupled with boosting risk appetite, could cap any significant rise in the safe haven dollar and limit the pair’s upside.
This, in turn, makes it prudent to wait for some follow-up buying beyond the daily high, around the 1.3025 area, before positioning for any significant intraday appreciation moves. Market participants now await the US economic docket, with JOLTS job openings and the Conference Board consumer confidence index. The data could influence the demand for dollars, which, together with the dynamics of the price of oil, should produce opportunities in the short term around the USD/CAD pair.
Technical levels
Source: Fx Street
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