- USD/CAD scales higher for the sixth straight day and climbs to a one-and-half-week high.
- The Fed’s hawkish outlook boosts the USD and remains supportive of the positive move.
- Retreating oil prices undermines the loonie and also contributes to the intraday strength.
The USD/CAD pair regains traction following an early dip to the 1.3680 region and moves into positive territory for the sixth successive day on Thursday. Spot prices rally closer to mid-1.3700s, hitting a one-and-half-week high during the early European session, and seem poised to prolong the recent bounce from sub-1.3500 levels.
The underlying bullish sentiment surrounding the US dollar, bolstered by a more hawkish stance adopted by the Federal Reserve, turns out to be a key factor offering support to the USD/CAD pair. It is worth recalling that the US central bank delivered a 75 bps rate hike for the fourth time in a row to combat stubbornly high inflation. Adding to this, Fed Chair Jerome Powell smashed expectations for a dovish pivot and said that rates would need to rise more than previously expected.
A fresh leg up in the US Treasury bond yields reinforces the prospects for further policy tightening by the Fed and continues to act as a tailwind for the buck. Furthermore, a softer risk tone provides an additional boost to the safe-haven greenback. Meanwhile, a modest pullback in crude oil prices from a three-week high is seen undermining the commodity-linked loonie. This, in turn, supports prospects for a further near-term appreciating move for the USD/CAD pair.
Even from a technical perspective, the overnight post-FOMC strong move up pushed spot prices beyond the 1.3670-1.3685 resistance zone. A subsequent strength and acceptance above the 1.3700 mark reaffirms the positive bias and favours bullish traders, suggesting that the path of least resistance for the USD/CAD pair is to the upside. Market participants now look forward to the US ISM Services PMI, which, along with the US bond yields, will drive the USD and provide some impetus to the major.