USD/CAD aims to recapture 1.3800 as US yields hit 4%, Fed Powell’s speech buzz

• USD/CAD is eyeing to recapture 1.3800 as DXY soars ahead of Fed Powell’s speech.
• The 10-year benchmark US Treasury yields have hit 4% for the first time since 2010.
• Weaker oil prices have crippled the loonie bulls against the greenback.

The USD/CAD pair is marching north to recapture a fresh two-year high around 1.3800 in the Tokyo session. The asset has resumed its upside journey after a minor correction to near 1.3640 and is expected to refresh its two-year high above 1.3800 in the coming sessions. The major concluded its corrective move after the release of upbeat US Consumer Confidence data.

The US Conference Board reported Consumer Confidence at 108.0, higher than the prior release of 103.6. This is a consecutive improvement in the sentiment data, which indicates that optimism is returning in consumers’ sentiment towards the economy. Also, it is a sign of robust retail demand. The high confidence of consumers in the US economy will delight the Federal Reserve (Fed) to announce more rate hikes unhesitatingly.

Meanwhile, the US dollar index (DXY) bulls are roaring and has refreshed its two-decade high at 114.68. The policy tightening cycle by the Fed to tame the galloping inflation has infused an adrenaline rush into the US Treasury yields. The 10-year benchmark US Treasury yields have touched 4% for the first time since 2010. Although yields failed to sustain elevated levels, it has opened doors for more upside.

The speech from Fed chair Jerome Powell will remain in focus. It is highly expected that the roadmap for further rate hikes in the remaining 2022 will be dictated.

Meanwhile, loonie bulls are underperforming amid broader weakness in oil prices. Soaring odds of a global recession have forced the market participants to a sell-off in the oil counter. It is worth noting that Canada is a leading exporter of oil to the US, and falling oil prices will significantly impact Canada’s fiscal balance sheet.