- USD/CAD oscillates in a narrow trading band during the Asian session on Friday.
- Retreating US bond yields keep the USD bulls on the defensive and cap the upside.
- The Fed's hawkish outlook, a softer risk tone to limit losses for the USD and the pair.
The USD/CAD pair enters a bullish consolidation phase during the Asian session on Friday and oscillates in a narrow trading band just below mid-1.3500s, or its highest level since June 1 touched the previous day.
The US Treasury bond yields pullback after hitting a multi-year peak on Thursday, which holds back the US Dollar (USD) bulls from placing fresh bets and acts as a headwind for the USD/CAD pair. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates higher for longer should limit any meaningful downside for the US bond yields and the USD. In fact, the July 25-26 FOMC policy meeting released on Wednesday revealed that policymakers continued to prioritize the battle against inflation, though were divided over the need for more rate hikes.
Moreover, the incoming US macro data pointed to an extremely resilient economy and support prospects for further policy tightening by the Fed. Apart from this, the prevalent risk-off environment further lends support to the safe-haven Greenback and the USD/CAD pair. China’s second-large realtor – Evergrande – and Tianji Holdings – a related company – filed for protection from creditors in a US bankruptcy court on Thursday. This adds to worries about the worsening economic conditions in China and leads to a further decline in the global equity markets.
Adding to this, worries that headwinds stemming from rapidly rising borrowing costs will dent demand fail to assist Crude Oil prices to capitalize on the overnight recovery from a two-week low. This, in turn, is seen undermining the commodity-linked Loonie and suggests that the path of least resistance for the USD/CAD pair is to the upside. Hence, any meaningful corrective decline might still be seen as a buying opportunity and is likely to remain limited in the absence of any relevant market-moving economic data, either from the US or Canada.
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 Weekly Forecast: Sellers gain confidence alongside the Fed Premium
The EUR/USD pair fell towards a fresh two-month low of 1.0900, finishing the second consecutive week in negative though little changed at around 1.0940.
Read full analysis
GBP/USD Weekly Forecast: Pound Sterling stays vulnerable ahead of UK inflation data Premium
The Pound Sterling (GBP) booked the second straight weekly loss against the US Dollar (USD), sending the GBP/USD pair to the lowest level in a month below 1.3050.
Gold Weekly Forecast: XAU/USD holds above key support area after bearish action to start week Premium
Gold (XAU/USD) declined sharply in the first half of the week but regained its traction after coming within a touching distance of $2,600.
Bitcoin Weekly Forecast: Will BTC decline further?
Bitcoin’s (BTC) price fell over 6% at some point this week until Thursday, extending losses for a second consecutive week, as it faced rejection from a key resistance barrier.
RBA widely expected to keep key interest rate unchanged amid persisting price pressures
The Reserve Bank of Australia is likely to continue bucking the trend adopted by major central banks of the dovish policy pivot, opting to maintain the policy for the seventh consecutive meeting on Tuesday.
Five best Forex brokers in 2024
VERIFIED Choosing the best Forex broker in 2024 requires careful consideration of certain essential factors. With the wide array of options available, it is crucial to find a broker that aligns with your trading style, experience level, and financial goals.