USD/CAD retreats from one-week high amid rising Oil prices, stronger USD to limit the downside
- USD/CAD gains some positive traction and climbs to over a one-week high on Tuesday.
- A combination of factors continues to push the USD higher and lend support to the pair.
- An intraday rise in Crude Oil prices underpins the Loonie and caps any meaningful gains.
The USD/CAD pair struggles to capitalize on its intraday positive move and retreats a few pips from the vicinity of mid-1.3500s, or over a one-week high touched earlier this Tuesday. The pair trades with a mild positive bias heading into the North American session and is currently placed just above the 1.3500 psychological mark.
Crude Oil prices rally over 1% amid hopes for an improvement in US fuel demand and disruptions in Canadian supply due to wildfires in the oil-rich Alberta province. This, in turn, underpins the commodity-linked Loonie and turns out to be a key factor acting as a headwind for the USD/CAD pair, though resurgent US Dollar (USD) demand should help limit the downside, at least for the time being. In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, climbs to a fresh two-month high and draws support from a combination of factors.
The overnight hawkish remarks by a slew of influential Federal Reserve (Fed) officials lifted market bets that the US central bank will keep interest rates higher for longer. This, along with hopes that US politicians can come together on a debt ceiling deal, keeps the US Treasury bond yields elevated and continues to benefit the Greenback. Apart from this, worries over slowing global growth, particularly in China, further benefit the Greenback’s relative safe-haven status and contribute to limiting any meaningful pullback for the USD/CAD pair, at least for the time being.
Market participants now look forward to the US economic docket, featuring the flash PMI prints, New Home Sales data and the Richmond Manufacturing Index. This, along with the debt ceiling talks and the US bond yields, will influence the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from Oil price dynamics to grab short-term opportunities. Meanwhile, the aforementioned mixed fundamental backdrop and the recent range-bound price action witnessed over the past week or so warrant some caution before placing directional bets.
Technical levels to watch
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