Forex world

March 30, 2023

USD/CAD remains depressed around mid-1.3500s

- USD/CAD drifts lower for the fourth straight day and is pressured by a combination of factors.

- The risk-on mood weighs on the USD and acts as a headwind amid a fresh leg up in Oil prices.

- Spot prices find some support ahead of the 100-day SMA as traders look to the US macro data.

The USD/CAD pair remains under some selling pressure for the fourth successive day on Thursday and drops to over a one-month low during the first half of the European session. The pair, however, manages to rebound a few pips in the last hour and is currently placed around mid-1.3500s, down less than 0.10% for the day.

The prevalent risk-on environment - as depicted by an extension of the recent rally in the equity markets - exerts fresh downward pressure on the safe-haven US Dollar (USD) and turns out to be a key factor acting as a headwind for the USD/CAD pair. The takeover of Silicon Valley Bank by First Citizens Bank & Trust Company helped calmed market nerves about the contagion risk. Furthermore, no further cracks have emerged in the banking sector over the past two weeks, which suggests that a full-blown banking crisis might have been averted and drives flows away from traditional safe-haven assets, including the Greenback.

Apart from a modest USD weakness, a fresh leg up in Crude Oil prices underpins the commodity-linked Loonie and contributes to the offered tone surrounding the USD/CAD pair. A surprise drop in US Crude stockpiles to a two-year low and concerns about tightening global supplies assist the black liquid to regain positive traction following the overnight pullback from over a two-week high. In fact, the Energy Information Administration reported an unexpected fall in US inventories to a two-year low

during the week of March 24. Moreover, exports from Iraq's northern region remain halted and lend support to Oil prices.

The USD/CAD pair, however, manages to find some support ahead of a technically significant 100-day Simple Moving Average (SMA) as traders keenly await the US inflation data due on Friday. The US Core PCE Price Index - the Fed's preferred inflation gauge - will play a key role in influencing market expectations about future rate hikes. This, in turn, will drive the USD demand and provide a fresh directional impetus to the major. In the meantime, traders on Thursday will take cues from Thursday's US economic docket, featuring the release of the final Q4 GDP print and the usual Weekly Initial Jobless Claims data.

Technical levels to watch


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