The intraday USD/CAD rebound from the 1.3700 support area is minimal. Fed rate rise wagers that are taken aggressively boost the USD demand and serve as a tailwind. Low oil prices have little impact on the Canadian dollar or give the pair any momentum.
On Friday, the USD/CAD pair found some support around the 1.3700 level and stopped its overnight decline from the 1.3975–1.3980 range, or its highest point since May 2020. In the early European session, the pair rises again toward the day high and trades around mid-1.3700s.
On the last day of the week, the US dollar gets some dip-buying, a crucial component providing support for the USD/CAD pair. The higher US consumer inflation data reported on Thursday confirmed market expectations for the Federal Reserve to raise rates by 75 basis points for the fourth time in November. This sustains the high US Treasury bond rates and boosts the dollar’s value.
But at least temporarily, a sharp shift in the perception of risk worldwide might prevent the safe-haven dollar and the USD/CAD pair from making any significant gains. The downside is cushioned with muted reaction to crude oil prices, which might weaken the loonie’s commodity-linked value. However, the virtual environment still seems heavily skewed in favor of optimistic traders.
Investors are nonetheless worried about the possible effects on the economy of fast-increasing borrowing prices, geopolitical uncertainties, and rising COVID-19 cases in China. This should maintain the safe-haven status of the dollar. Additionally, there are concerns that the global economy may worsen and that new COVID-related lockdowns in China would reduce fuel consumption, impacting crude oil prices.
The elements above imply that the USD/CAD pair’s upward movement will encounter the slightest opposition. However, a decisive breach below the round number of 1.3700 might invalidate the bullish picture and ignite intense technical selling. The decline will signal that the current bounce from the psychological level of 1.3500 has already fizzled out and opened the door for further downside.
The publication of monthly Retail Sales numbers, the preliminary Michigan Consumer Sentiment, and the Inflation Expectations Index are among the US economic items on the calendar that market investors anticipate. This will fuel the demand for the USD, US bond rates, and statements made by significant FOMC members. In addition, oil price fluctuations may provide near-term trading opportunities centered on the USD/CAD pair.