- USD/CAD reversed a dip to the 1.2435 region and short to near two-month tops on Monday.
- The Fed’s hawkish surprise continued acting as a tailwind for the USD and remained supportive.
- An uptick in oil prices might underpin the loonie and keep a lid on any further gains for the pair.
The USD/CAD pair seesawed between tepid gains/minor losses through the early European session and consolidated its recent strong gains to near two-month tops. The pair was last seen trading around the 1.2465-70 region, nearly unchanged for the day.
A combination of diverging forces failed to assist the USD/CAD pair to capitalize on last week's strong positive move, instead led to a subdued/range-bound price action on the first day of a new week. A modest uptick in oil prices underpinned the commodity-linked loonie. On the other hand, the ongoing decline in the US Treasury bond yields held the US dollar bulls on the defensive and capped gains for the major.
That said, the Fed's surprise hawkish shift acted as a tailwind for the USD and helped limit any meaningful corrective slide for the USD/CAD pair. The Fed surprised investors at the end of June policy meeting on Wednesday and brought forward its timetable for the first post-pandemic interest rate hikes. The so-called dot plot pointed to two rate hikes by the end of 2023 as against March's projection for no increase until 2024.
Adding to this, St. Louis Fed President James Bullard said on Friday that Fed Chairman Jerome Powell officially opened taper discussion at the last meeting. Speaking to CNBC, Bullard further added that the shift toward a faster tightening of monetary policy was a natural response to stronger economic growth and a quicker than expected rise in inflationary pressures.
The fundamental backdrop remains tilted firmly in favour of bullish traders and supports prospects for additional gains. Hence, a subsequent strength beyond the key 1.2500 psychological mark, towards testing the next relevant hurdle near the 1.2535 horizontal zone, now looks a distinct possibility. In the absence of any major market-moving economic release, the USD/oil price dynamics will continue to play a key role in influencing the USD/CAD pair.
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 clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.