USDCAD struggles below 1.3300, lowest since September amid rallying oil prices and weaker USD
- USDCAD drops to its lowest level since September 20 and is pressured by a combination of factors.
- Rallying crude oil prices underpins the Loonie and drags the pair lower amid sustained USD selling.
- Bets for less aggressive Fed rate hikes, sliding US bond yields, the risk-on mood weigh on the buck.
The USDCAD pair struggles to capitalize on its modest intraday uptick to levels just above the 1.3600 mark and attracts fresh selling on the last day of the week. The pair drops to its lowest level since September 20, around the 1.3284 region during the first half of the European session and is pressured by a combination of factors.
Crude oil prices rally over 3% on Friday in reaction to the news that China, the world's top oil importer, eased some of the strict COVID restrictions. This, in turn, underpins the commodity-linked Loonie and drags the USDCAD pair lower for the second successive day, also marking the fifth day of a negative move in the previous six. Apart from this, the prevalent selling bias surrounding the US Dollar (USD) is seen as another factor exerting downward pressure on the major.
In fact, the USD Index, which measures the greenback's performance against a basket of currencies, hits a two-and-half-month low amid expectations for a less aggressive policy tightening by the Fed. The softer US consumer inflation figures released on Thursday indicated that the worst of the post-pandemic price spike is over. The data reaffirms bets for smaller Fed rate hikes in coming months, which leads to a further decline in the US bond yields and weighs on the greenback.
Furthermore, the risk-on mood - as depicted by a strong rally in the equity markets - takes its toll on the safe-haven buck. That said, slightly oversold conditions on intraday charts offer some support to the USDCAD pair and help limit the downside, at least for the time being. Traders now look forward to the US economic docket, featuring the release of the Preliminary Michigan US Consumer Sentiment Index for some short-term opportunities later during the early North American session.
Technical levels to watch