On Thursday, the USD/CAD received strong follow-through traction for the fourth session in a row.
The safe-haven USD continues to profit from Wednesday’s hawkish FOMC minutes and COVID-19 worries.
The loonie was weakened by falling crude oil prices, which gave the major a lift.
During the early European session, the USD/CAD pair caught some fresh bids and rocketed to its highest level since April 21 at the mid-1.2500s in the previous hour.
On Thursday, a mix of supportive factors helped the USD/CAD pair build on this week’s robust uptrend and achieve positive traction for the fourth straight session. The US dollar stayed strong near three-month highs, buoyed by signs that the Federal Reserve will begin tightening its monetary policy later this year. Aside from that, the recent significant drop in crude oil prices weakened the commodity-linked loonie and gave the major an additional lift.
Policymakers expect conditions to slow the pace of asset purchases to be met sooner than previously expected, according to the minutes of the June FOMC meeting released on Wednesday. Fed policymakers also agreed that if inflation or other threats develop, they must be prepared to act, implying that QE tapering conversations could begin in the coming months. The USD bulls appeared unconcerned with the steady decrease in US Treasury bond yields, instead taking their signals from the current risk-off mindset.
Concerns about the economic consequences of the extremely contagious Delta version of the coronavirus spreading continued to weigh on investors’ minds. Another aspect that benefited the safe-haven dollar and functioned as a tailwind for the USD/CAD pair was a significant drop in US equities futures, which was perceived as another factor that benefited the safe-haven greenback and acted as a tailwind for the USD/CAD pair.
Meanwhile, oil prices fell further from their highest intraday level since November 2014, owing to concerns that the United Arab Emirates (UAE) could unilaterally increase output in the aftermath of a dispute with Saudi Arabia. It’s worth remembering that the UAE fought a proposal to extend production restrictions until the end of 2022, rather than the existing deadline of April 2022. The black gold continued to be weighed down by anxiety about how the OPEC+ deadlock may affect future oil output.
Aside from that, some technical buying on a prolonged advance past the important 1.2500 psychological mark could be credited for Thursday’s powerful rally. The subsequent strength has paved the ground for more gains after the USD/CAD pair verified a near-term breakout through a short-term descending trend-line resistance this week. Bulls can retake the 1.2600 level with some follow-through purchasing beyond the 1.2560 horizontal barrier, reaffirming the positive set-up.
Market players are currently waiting for the US Initial Weekly Jobless Claims data, which will be released later in the early North American session. This, together with broader market risk sentiment, will increase USD demand and provide the USD/CAD pair a boost. The Energy Information Administration will issue crude oil inventories data, which could influence oil price dynamics and allow traders to profit from short-term chances, according to the US economic calendar./n
