- USD/CAD has retreated further from its highest level since January amid broad-based USD weakness.
- The risk-on impulse drives profit taking around the safe-haven back and weighs heavily on the majors.
- Falling oil prices could undermine Looney and provide support amid hawkish Fed expectations.
The USD/CAD pair came under heavy selling pressure on the first day of the new week, further retreating from its highest since January 6 touched on Friday. The pair maintains the tone he provided around 1.3565-1.3560 throughout the early North American session and reacts little to the mixed US macro data.
The US Census Bureau reported that durable goods orders fell 4.5% in January, down sharply from the previous month’s downwardly revised reading of strong growth of 5.1%. However, this disappointment was offset by orders excluding shipping items, which rose 0.7% during the reported month and failed to provide any impetus, compared with a projected slight 0.1% rise.
That said, the rebound in global risk sentiment continues to weigh on safe haven greenbacks, as evidenced by the generally positive tone of the stock market. This is seen as a key factor putting pressure on the USD/CAD pair, but the combination of factors will help limit deeper losses and caution should be exercised before positioning further down.
Oil prices have been hit by new supply amid concerns that rapidly rising borrowing costs will dampen economic growth and weigh on fuel demand. This could undermine a commodity-linked looney. Apart from this, expectations that the Federal Reserve will stubbornly stick to its hawkish stance in the wake of high inflation support the outlook for the emergence of US dollar declining buying.
From a technical standpoint, the USD/CAD pair also confirmed last week’s breakout of the 100-day simple moving average (SMA) in favor of bullish traders. Additionally, speculation that the Bank of Canada (BoC) will pause its policy tightening cycle would be prudent to wait for strong follow-through selling to confirm spot prices have plateaued in the short term.