- A combination of supporting factors lifts USD/CAD to a four-day high on Wednesday.
- Tumbling Oil prices undermines the Loonie and acts as a tailwind amid a stronger USD.
- Acceptance above the 200-day SMA supports prospects for additional intraday gains.
The USD/CAD pair catches fresh bids on Wednesday and climbs to a four-day high, around the 1.3425 region during the first half of the European session. Spot prices, for now, seem to have found acceptance above a technically significant 200-day Simple Moving Average (SMA) and draw support from a combination of factors.
A combination of factors weighs heavily on the Canadian Dollar, which, along with a modest US Dollar (USD) uptick act as a tailwind for the USD/CAD pair. Despite falling US inventories and strong Chinese economic data, Oil prices dive to a fresh monthly low amid worries that rising borrowing costs will slow economic growth and dampen fuel demand. Apart from this, signs of cooling consumer inflation in Canada undermine the commodity-linked Lonie.
The USD, on the other hand, draws support from a further rise in the US Treasury bond yields, bolstered by the prospects for further policy tightening by the Federal Reserve (Fed). In fact, the markets have nearly fully priced in a 25 bps lift-off in May and the Fed funds futures indicate a small chance of another rate hike in June. This, in turn, pushes the yield on the benchmark 10-year US government bond and the rate-sensitive two-year Treasury note to a multi-week high.
The latest leg up, meanwhile, confirms a breakout through the 200-day SMA, which, along with the aforementioned supportive
fundamental backdrop suggests that the path of least resistance for the USD/CAD pair is to the upside. In the absence of any relevant market-moving economic data on Wednesday, either from the US or Canada, investors will focus on the release of the Fed’s Beige Book, due later during the US session, for the central bank’s take on the state of the US economy.
This, along with the US bond yields, will drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from the official US Crude inventory report by the Energy Information Administration (EIA), which should influence Oil price dynamics and contribute to producing short-term opportunities around the major.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD holds above 1.0400 in quiet trading
EUR/USD trades in positive territory above 1.0400 in the American session on Friday. The absence of fundamental drivers and thin trading conditions on the holiday-shortened week make it difficult for the pair to gather directional momentum.
GBP/USD recovers above 1.2550 following earlier decline
GBP/USD regains its traction and trades above 1.2550 after declining toward 1.2500 earlier in the day. Nevertheless, the cautious market mood limits the pair's upside as trading volumes remain low following the Christmas break.
Gold declines below $2,620, erases weekly gains
Gold edges lower in the second half of the day and trades below $2,620, looking to end the week marginally lower. Although the cautious market mood helps XAU/USD hold its ground, growing expectations for a less-dovish Fed policy outlook caps the pair's upside.
Bitcoin misses Santa rally even as on-chain metrics show signs of price recovery
Bitcoin (BTC) price hovers around $97,000 on Friday, erasing most of the gains from earlier this week, as the largest cryptocurrency missed the so-called Santa Claus rally, the increase in prices prior to and immediately following Christmas Day.
2025 outlook: What is next for developed economies and currencies?
As the door closes in 2024, and while the year feels like it has passed in the blink of an eye, a lot has happened. If I had to summarise it all in four words, it would be: ‘a year of surprises’.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.