- USD/CAD added to the overnight losses and remained depressed through the early European session.
- Elevated US bond yields did little to provide any respite to the USD or lend any support to the major.
- A modest pullback in oil prices also failed to impress bulls or stall the ongoing downward trajectory.
The USD/CAD pair remained depressed through the early European session and was last seen hovering near three-year lows, around the 1.2380 region.
The pair added to the previous day’s post-FOMC slump of over 90 pips and edged lower during the first half of the trading action on Thursday. The downtick dragged the USD/CAD pair to the lowest level since February 2018, though a combination of factors helped limit any further losses. As investors digested Wednesday’s dovish FOMC statement, elevated US Treasury bond yields eased the bearish pressure surrounding the US dollar. Apart from this, a modest pullback in crude oil prices might undermine the commodity-linked loonie and extend some support to the USD/CAD pair.
The Fed reiterated that it was in no rush to raise interest rates at least through 2023 and also upgraded its economic projections. The median GDP forecast stood at 6.5% for the current year, while inflation is expected to exceed the Fed’s 2% target and rise 2.4% this year. The policymakers made no mention of the recent sharp surge in long-term borrowing cost, nor any effort to combat those movements. This, in turn, allowed the yield on the benchmark 10-year US government bond to hold steady near the highest level since January 2020, just above 1.65%.
Meanwhile, oil prices edged lower for the fifth consecutive session amid a sustained build in US crude inventories. The EIA report on Wednesday showed a build of 2.396 million barrels for the week to Mar. 5, marking a fourth straight week of builds. This comes amid concerns that the suspension of COVID-19 vaccine rollouts in Europe and a spike in newly reported cases could hurt fuel demand recovery. This, however, did little to provide any respite to the USD/CAD pair or stall the ongoing downfall, at least for the time being.
Moving ahead, market participants now look forward to the US economic docket – featuring the releases of the Philly Fed Manufacturing Index and the usual Initial Weekly Jobless Claims. This, along with the US bond yields, might influence the USD. Apart from this, oil price dynamics might further assist traders to grab some short-term opportunities around the USD/CAD pair.
Technical levels to watch
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