• USD/CAD gains traction for the third successive day and climbs to a fresh multi-week high.
  • Weaker oil prices undermine the loonie and remain supportive amid a modest USD strength.
  • Aggressive Fed rate hike bets and the risk-off mood continues to benefit the safe-haven buck. 

The USD/CAD pair prolongs its bullish move for the third straight day on Thursday and climbs to its highest level since July 14 during the first half of the European session. The strong momentum is sponsored by a combination of factors, which bulls now awaiting a sustained move beyond the 1.3200 mark.

Investors remain worried that a deeper global economic downturn, along with fresh COVID-19 restrictions in China, will dent fuel demand. This, in turn, drags crude oil prices to a one-and-half-week low on Thursday and undermines the commodity-linked loonie. Apart from this, the underlying bullish sentiment surrounding the US dollar act as a tailwind for the USD/CAD pair.

Firming expectations that the Fed will stick to its aggressive policy tightening path remain supportive of a further rise in the US Treasury bond yields. In fact, the yield on the 2-year US government bond, which is highly sensitive to rate hike expectations, rose to a 15-year high. Apart from this, the prevalent risk-off mood continues to benefit the safe-haven buck.

The fundamental backdrop seems tilted firmly in favour of the USD bulls and supports prospects for a further near-term appreciating move for the USD/CAD pair. Hence, a subsequent strength back towards resting the YTD peak, around the 1.3225 region touched in July, remains a distinct possibility. Moreover, any corrective pullback could be seen as a buying opportunity.

Market participants now look forward to the US economic docket, featuring the release of Weekly Initial Jobless Claims and the ISM Manufacturing PMI. This, along with the US bond yields and the risk sentiment, will influence the USD and provide a fresh impetus to the USD/CAD pair. Traders might also take cues from oil price dynamics to grab short-term opportunities.

Technical levels to watch

This article was originally published by Fxstreet.com.Read the original article here.

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