- US dollar’s recovery attempt fails at 1.2645.
- The Canadian dollar appreciates amid higher oil prices and retreating US yields.
- USD/CAD expected to move lower in the coming weeks – Rabobank.
US dollar’s recovery from two-week lows at 1.2595 has been short-lived on Friday, as the pair was capped at 1.2645, before pulling back to the 1.2615 area.
Four-day sell-off for the US dollar
The USD is trading lower for the fourth day in a row against its Canadian counterpart, on track to its weakest weekly performance so far this year.
The lack of progress in the peace talks between Russia and Ukraine has triggered a pick-up on crude oil prices. Beyond that, the International Energy Agency (IEA) has warned earlier this week that the decline in global demand caused by higher prices will not offset the shut-in of Russian supplies, which has increased support to the commodity-linked CAD.
Beyond that, the lower US Treasury bonds yields, which have been retreating from multi-year highs after Wednesday’s Fed rate hike, have increased bearish pressure on the USD, which has lost ground against its main rivals this week.
USD/CAD to move lower for the coming weeks– Scotiabank
FX analysts at Scotia Bank see the pair retreating below 1.2600 and point out to a key support area at 1.2575: “Seasonal trends reflect a typically soft Q1 performance for the CAD which turns more positive as we move into Q2/Q3. We expect limited scope for USD gains in the short run and look for more CAD improvement in the coming weeks (…) “We spot resistance at 1.2650 intraday and look for firm resistance to cap USD gains today. Key USD support remains 1.2575/85.”