- A combination of factors helps USD/CAD gain positive traction for the third day in a row.
- Pullback in oil prices weighs on CAD and offers support to the pair amid modest USD strength.
- Bulls may refrain from opening aggressive positions ahead of US data and BoC monetary policy decision.
USD/CAD has broken the 1.2400 barrier during Wednesday’s European session and has soared near two-week highs in the last hour. At the time of writing, the pair is trading around the 1.2425 region, up 0.30% on the day.
USD/CAD has captured fresh buying
USD/CAD has gained fresh buyers and continued its recent recovery from the lows below 1.2300, at four-month lows. Following a brief consolidation during the first half of Wednesday’s trading activity. This marks the third consecutive day of a positive move, also the fourth in the previous five, and is due to a combination of factors.
Crude oil prices have declined and reversed the previous day’s gains near multi-year highs. In turn, this has influenced the CAD, a currency closely linked to commodities, and acted as a tailwind for USD/CAD. Additionally, the latest phase of the sudden rally in the last hour could also be attributed to the emergence of some buying around the US dollar.
In view of early monetary policy tightening by the Fed, Tuesday’s upbeat US macro data provided some support for the USD. Risk appetite sentiment, coupled with a further fall in US Treasury yields, could limit gains in the safe-haven USD and USD/CAD pair.
Investors may also refrain from opening aggressive positions
Investors may also refrain from opening aggressive positions and sit on the sidelines ahead of Wednesday’s Bank of Canada meeting. At the start of the US session, the Canadian central bank will announce its monetary policy decision, which could cause some volatility in the USD/CAD pair.
Meanwhile, the US economic calendar features durable goods orders. Apart from this, US bond yields and broader market risk sentiment could influence USD demand. Investors will take further cues from oil price dynamics to capitalize on some opportunities around the USD/CAD pair.