USD/CAD moves back above 1.2700, fresh daily high amid stronger USD/retreating oil prices
- USD/CAD regained positive traction on Thursday and was supported by a combination of factors.
- Retreating crude oil prices undermined the loonie and extended some support amid stronger USD.
- Investors await key central bank decisions for a fresh impetus ahead of the US ISM Services PMI.
The USD/CAD pair maintained its bid tone through the first half of the European session, with bulls making a fresh attempt to build on the momentum beyond the 1.2700 mark.
A combination of supporting factors assisted the USD/CAD pair to regain some positive traction on Thursday and snap three successive days of the losing streak to a one-week low. Crude oil prices moved away from a fresh seven-year high touched in the previous day and undermined the commodity-linked loonie. Apart from this, a goodish pickup in the US dollar demand acted as a tailwind for the major.
The markets seem to have digested the OPEC+ decision on Wednesday to stick to moderate rises of 400K barrels per day in its output. Adding to this, comments from Iran's Oil Minister, saying the country was ready to return to the market as quickly as possible, prompted profit-taking around the commodity. That said, tight global supplies and geopolitical tensions should limit losses for the black gold.
On the other hand, the USD made a solid comeback and reversed a part of the overnight losses, aggravated by the dismal US ADP report. Despite less hawkish comments by Fed officials, investors seem convinced that the Fed will tighten its policy at a faster pace than anticipated. This, along with an uptick in the US Treasury bond yields and a softer risk tone, extended some support to the greenback.
The uptick, however, lacked bullish conviction and the USD/CAD pair, so far, has struggled to find acceptance above the 1.2700 round figure. The fact that a slew of influential FOMC members downplayed the prospects for a 50 bps rate hike in March held back the USD bulls from placing aggressive bets. This, in turn, was seen as the only factor that capped gains for the USD/CAD pair.
Market participants now look forward to the US economic docket, highlighting the release of the ISM Services PMI later during the early North American session. This, along with the US bond yields and the broader market risk sentiment, might influence the USD demand. Traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.
Technical levels to watch