- A combination of factors dragged USD/CAD lower for the second successive day.
- Rising oil prices underpinned the loonie and exerted pressure amid a weaker USD.
- The US macro releases failed to impress the USD bulls or provide any impetus.
The USD/CAD pair remained on the defensive through the early North American session and was last seen trading near the daily low, around the 1.2480-1.2475 region.
Following an intraday uptick to levels just above the 1.2500 psychological mark, the USD/CAD pair turned lower for the second straight day on Wednesday and was pressured by a combination of factors. The heavily offered tone surrounding the US dollar was seen as a key factor that acted as a headwind amid rising crude oil prices, which tend to benefit the commodity-linked loonie.
In fact, the USD added to the previous day's losses and dropped to over a one-week low despite not so encouraging geopolitical headlines. In fact, a Kremlin spokesperson said that they have not noticed anything that looks like a breakthrough in negotiations. Moreover, an adviser to Ukraine’s President noted that Russia transferring forces from Kyiv to encircle troops in the east.
Even elevated US Treasury bond yields, bolstered by hawkish Fed expectations, did little to lend any support to the buck. On the economic data front, the US ADP report showed that private-sector employers added 455K jobs in March as compared to the 450K expected. Adding to this, the previous month's reading was also revised higher to 486K from the 475K reported earlier.
The upbeat report, however, was overshadowed by a slight disappointment from the final US GDP report, which showed that economic growth in the last quarter of 2021 stood at 7.1% as against the 7.2% estimated. This, in turn, failed to impress the USD bulls or provide any impetus to the USD/CAD pair, which remains well within the striking distance of over a two-month low set earlier this week.
On the other hand, the Canadian dollar drew support from strong follow-through rise in crude oil prices. Scepticism about any progress in the Russia-Ukraine peace talks, along with the growing prospect of new Western sanctions against Russia, acted as a tailwind for the black liquid. That said, the imposition of fresh COVID-19 restrictions in China might cap gains for the commodity.
The mixed fundamental backdrop might hold back traders from placing aggressive bearish bets around the USD/CAD pair. This, in turn, suggests that any subsequent slide is more likely to find decent support and attract some buying near the YTD low, around mid-1.2400s. The latter should act as a pivotal point, which if broken decisively should pave the way for further near-term losses.