The USD/CAD pair attracts fresh buying near the 1.3445-1.3440 horizontal support zone and continues scaling higher through the early part of the European session. Spot prices reverse the previous day’s downfall, with bulls now awaiting a sustained move beyond the 1.3500 psychological mark before placing fresh bets.
Crude oil prices come under some renewed selling pressure amid worries that rapidly rising borrowing costs will dampen economic growth and dent fuel demand. This, in turn, weighs on the commodity-linked Loonie, which, along with sustained US Dollar buying, provides a goodish lift to the USD/CAD pair and remains supportive of the intraday positive move.
The USD remains well within the striking distance of a six-week high touched last Friday and continues to draw support from expectations that the Fed will stick to its hawkish stance. In fact, the markets are pricing in at least a 25 bps lift-off at the next two FOMC meetings in March and May, which pushes the US Treasury bond yields higher and underpins the buck.
Apart from this, the cautious market mood – amid looming recession risks and geopolitical tensions – further benefits the Greenback’s relative safe-haven status. The USD/CAD pair, however, remains below the 1.3500 mark as traders seem reluctant ahead of monthly Canadian consumer inflation figures, due for release later during the early North American session.
Traders will take cues from the flash US PMI prints, which, along with the US bond yields and the broader risk sentiment, will drive the USD demand. Apart from this, oil price dynamics should traders to grab short-term opportunities around the USD/CAD pair. The focus, however, will remain glued to the FOMC monetary policy meeting minutes on Wednesday.
