- USD/CAD built on the previous day’s strong intraday bounce from multi-month lows.
- A fresh wave of the global risk-aversion provided a strong lift to the safe-haven USD.
- Sliding oil prices undermined the loonie and remained supportive of the positive move.
The USD/CAD pair edged higher through the early European session and jumped to fresh weekly tops, around the key 1.3500 psychological mark.
The pair built on the overnight goodish bounce of around 120 pips from three-month lows and gained some follow-through traction on Thursday. The momentum was supported by a combination of factors, including resurgent US dollar demand and a sharp fall in crude oil prices.
The Fed on Wednesday pledged to maintain the rate unchanged at near-zero levels through 2022 and offered a bleak outlook for the US economy. This, in turn, triggered a fresh wave of the global risk-aversion trade and provided a strong boost to the greenback’s safe-haven status.
In its latest projections, the US central bank expects the US economy to shrink by 6.5% in 2020 and the unemployment rate to be at 9.3% at year-end. The Fed committed to continue with extraordinary policy measures and increase its holdings of treasury/MBS at least at the current pace.
Meanwhile, oil prices fell around 4% on Thursday amid worries about slow demand growth and an unexpected rise in the US crude inventories. Sliding oil prices undermined demand for the commodity-linked loonie and further contributed to the USD/CAD pair’s strong bid tone.
It, however, remains to be seen if the pair is able to capitalize on the move to one-week tops or continues with its struggle to sustain above the very important 200-day SMA. Hence, it will be prudent to wait for a sustained strength beyond the 1.3500 mark before positioning for any further recovery.
Moving ahead, market participants now look forward to the US macro releases for a fresh impetus. Thursday’s US economic docket highlights the release of Producer Price Index and the Initial Weekly Jobless Claims, which might influence the USD price dynamics and produce some meaningful trading opportunities.
Technical levels to watch
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