Ella 
USD/CAD gained some positive traction for the third day in a row on Thursday and maintained a buying tone near two-week highs during early European trade. Spot prices are currently trading around 1.3730, up 0.10% on the day, and continue to be supported by a variety of factors.
Weak Canadian consumer inflation data on Tuesday forced market participants to reduce bets on another interest rate hike from the Bank of Canada (BOC). In addition to this, some intraday selling in crude oil prices also weakened the commodity-linked currency. Coupled with the bullish outlook for the U.S. dollar (USD), USD/CAD is on the positive side, supporting the prospect of further appreciation in the near term.
The Organization of the Petroleum Exporting Countries (OPEC+) reportedly does not plan to take any immediate action on Iran’s call for Islamic countries to impose an oil embargo and other sanctions on Israel over its war with Hamas in Gaza. Separately, the Biden administration on Wednesday eased sanctions on Venezuela’s oil sector, allowing it to produce oil and export to selected markets without any restrictions for the next six months. This eased concerns about global supply and put pressure on oil prices.
Additionally, concerns about economic headwinds from rapidly rising borrowing costs could weaken fuel demand, further weighing on oil prices. Still, geopolitical tensions in the Middle East, as well as larger-than-expected inventory drawdowns in the United States – the world’s largest oil consumer – could act as tailwinds for the commodity and help limit any meaningful gains in the short term. of decline.
Meanwhile, the U.S. dollar continues to find support amid growing sentiment that the Federal Reserve will keep interest rates higher for longer. The prospect has led to a sustained sell-off in U.S. fixed-income markets, pushing the benchmark 10-year Treasury yield to a 16-year high and approaching the psychological 5% mark. This, coupled with a generally risk-averse environment, continues to provide support for risk-averse green cards.
The fundamental backdrop above appears to be favorable for USD bulls, suggesting minimal upside resistance for the USD/CAD pair. However, investors may avoid making aggressive bets ahead of Federal Reserve Chairman Jerome Powell speaking later in the U.S. session. Meanwhile, U.S. macro data – weekly initial unemployment rate, Philadelphia Fed manufacturing index and existing home sales data – may provide some impetus.
