USD/CAD struggles near weekly lows, just above mid-1.2600s
- A combination of factors prompted aggressive selling around USD/CAD on Thursday.
- Bullish oil prices underpinned the loonie and exerted pressure amid weaker greenback.
- Investors now look forward to Canadian/US macro data for some meaningful impetus.
The intraday USD selling picked up during the early European session and dragged the USD/CAD pair to fresh weekly lows, around mid-1.2600s in the last hour.
Following the previous day’s post-FOMC modest bounce, the USD/CAD pair witnessed aggressive selling on Thursday and extended this week’s retracement slide from the 1.2900 neighbourhood, or one-month tops. This marked the third successive day of a negative move and was sponsored by a combination of factors.
The Fed on Wednesday indicated that it will likely begin reducing its monthly bond purchases toward the end of this year. This, however, disappointed some investors expecting an immediate start to the withdrawal of the massive pandemic-era stimulus and prompted some profit-taking around the US dollar.
Apart from this, the risk-on mood was seen as another factor that weighed on the safe-haven greenback. The global risk sentiment got a strong boost after the People’s Bank of China injected more money into the banking system, which eased concerns about the fallout from China Evergrande’s debt crisis.
In fact, the key USD Index has now reversed the previous day’s positive move to one-month tops and was further pressured by the risk-on mood.
Meanwhile, oil prices remained well supported by Wednesday’s bullish EIA report, which showed that US crude stocks last week fell to 414 million – the lowest since October 2018. This, in turn, underpinned the commodity-linked loonie and contributed to the heavily offered tone surrounding the USD/CAD pair.
Market participants now look forward to Thursday’s economic docket, highlighting the release of Canadian Retail Sales, the US Weekly Initial Jobless Claims and the flash US PMI prints. The data, along with the USD/oil price dynamics, might provide some trading impetus to the USD/CAD pair.
Technical levels to watch