The Canadian dollar gained nearly 80-pip in the two consecutive session. Fresh demand in commodity prices and a subdued US performance sponsored the upside momentum in the USD/CAD pair.
Lonnie remains the second best performing primary currency and is expected to perform better if the recession fears fade out.
The Bank of Canada (BoC) hiked the interest rates with a 100bps in July, the move surprised the currency market that raised the bar for other central banks.
On the other hand, the U.S Federal Reserve raised interest rates by 75bps as expected to a 100bps hike.
Additionally, several Fed policymakers hinted that the central bank might adopt a less aggressive stance on interest rates to tame inflation even at the risk of a recession. Investors braces for the US Non-Farm payroll data due for July due on Friday. The market expects data to come at 250K.
The concern over escalated US-Sino tensions and ongoing concerns over the global economic outlook underpins the demand for the dollar.
Despite the gains in the greenback, the commodity currency gained on the recovery in the commodity prices. Gold turns positive for the second straight session amid risk-off mode and is not so bullish on the U.S dollar.
WTI crude oil rose $91 per barrel on Thursday following a 4% down in the previous trading session. A modest supply increase from OPEC and its allied members amid rising US crude inventories.
USD/CAD fell below the 50-day EMA
The daily chart’s USD/CAD pair fell below the critical 50-day EMA—the ascending trend line from the lows of 1.2428 acts as a support for the bulls.
The RSI (14) trades far from the oversold territory. It reads at 44, signaling more downside in the pair. A break below the session low of 1.2817 would mean 1.2720 in the next few sessions.
Alternatively, a fresh buying near 1.2850 could invalidate the bearish arguments on the spot. An acceptance above 1.2890 would see another leg-up in USD/CAD.
