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The USD/CAD pair rebounded crisply on Thursday and Friday, climbing 1.7% to 1.2727 after closing at a three-year low of 1.2510 on Wednesday. A continued upward movement in the USD/CAD will depend on the interplay between competing fundamental factors – higher commodity prices supporting the Canadian dollar and higher US Treasury rates backing the US dollar, FXStreet’s Analyst Joseph Trevisani briefs. 

Key quotes

“The commodity and oil price trends that have supported the Canadian dollar since the third quarter have not reversed but they have been much in advance of any actual improvement in the US, Canadian or global economies. Having priced the expected growth, commodity markets may well pause, waiting for concrete signs of the recovery.”

“If US Treasury rates continue to rise then that differential will become the energy for the USD/CAD rise.”

“In the competition between commodity pricing and US interest rates the outcome is undecided. Treasury rates may have the edge as they have a longer way to rise and they are the more recent change. But they also have their own impediment, a central bank bent on keeping yields low. Even if US bankers have not, as yet, attempted to quell the gains in the middle to far reaches of the yield curve.”

 

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