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  • USD/CAD struggled to capitalize on its intraday gains to weekly tops, around the 1.2155-60 region.
  • Bulls seemed rather unimpressed by the US CPI-inspired USD strength and sliding crude oil prices.
  • A more hawkish BoC acted as a tailwind for the loonie and kept a lid on the attempted recovery.

The USD/CAD pair seesawed between tepid gains/minor losses through the first half of the European session and was last seen hovering in the neutral territory, around the 1.2125-30 region.

A combination of supporting factors assisted the pair to gain some positive traction on Thursday and build on the previous day’s US CPI-inspired rebound from the 1.2045 region, or five-year lows. Concerns about the continuous surge in new COVID-19 cases in India continued to fan worries about the fuel demand recovery. This was evident from a sharp fall in crude oil prices, which undermined the commodity-linked loonie and extended some support to the USD/CAD pair.

On the other hand, the US dollar was underpinned by Wednesday’s red-hot US inflation report, which fanned speculations about an earlier than anticipated tightening by the Federal Reserve. Apart from this, the prevalent risk-off environment – as depicted by an extended selloff in the global equity markets – further boosted the greenback’s relative safe-haven status. That said, a modest pullback in the US Treasury bond yields held the USD bulls from placing aggressive bets.

Meanwhile, a more hawkish stance adopted by the Bank of Canada continued acting as a tailwind for the Canadian dollar. This was seen as another factor that failed to assist the USD/CAD pair to capitalize on its early uptick to weekly tops, around the 1.2155-60 region. Hence, it will be prudent to wait for some strong follow-through buying before confirming that the recent downward trajectory has run its course and positioning for any strong near-term recovery move.

Market participants now look forward to the US economic docket – highlighting the release of the usual Initial Weekly Jobless Claims and Producer Price Index (PPI) – for some impetus. This, along with the US bond yields and the broader market risk sentiment will influence the USD. Apart from this, oil price dynamics will further contribute to producing some meaningful trading opportunities around the USD/CAD pair.

Technical levels to watch


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