USD/CAD sticks to modest intraday gains amid bearish oil prices, Powell’s speech awaited
- USD/CAD regains positive traction on Thursday and is supported by a combination of factors.
- Bearish crude oil prices languish near a multi-month low and continue to undermine the loonie.
- A modest USD uptick further acts as a tailwind for the pair ahead of Fed Chair Powell’s speech.
The USD/CAD pair quickly reverses an intraday dip to the 1.3100 area and climbs to a fresh daily high during the first half of the European session. The pair has now reversed a major part of the overnight losses and is currently placed just below the mid-1.3100s.
As investors digest a more hawkish Bank of Canada, weaker crude oil prices continue to undermine the commodity-linked loonie and assist the USD/CAD pair to regain positive traction on Thursday. It is worth recalling that the Canadian central bank hiked its benchmark rates by 75 bps on Wednesday and indicated the need to raise interest rates further. This, however, is overshadowed by the underlying bearish sentiment around the oil markets.
Investors remain concerned that a deeper global economic downturn and headwinds stemming from fresh COVID-19 curbs in China would result in lower fuel demand. This, to a larger extent, offset worries about tight global supply and drag crude oil prices to the lowest level since February 2022. Apart from this, the emergence of some US dollar dip-buying extends additional support to the USD/CAD pair and contributes to the intraday move up.
Expectations that the Fed will continue to tighten its monetary policy more aggressively to tame help limit the overnight USD pullback from a two-decade high. Despite the supporting factors, bulls might prefer to wait for Fed Chair Jerome Powell's speech during the early North American session before placing fresh bets around the USD/CAD pair. Nevertheless, the fundamental backdrop supports prospects for a further near-term appreciating move.
Technical levels to watch