The USD/CAD currency pair retested a multi-week high on Thursday, navigating through a complex landscape of market factors. Trading in neutral territory around the 1.4335 region during the early European session, the pair showed signs of volatility but lacked the momentum for sustained buying. Investors are closely monitoring the potential for the pair to reclaim the 1.4400 mark, which aligns with the 38.2% Fibonacci retracement level.
The potential for a convincing break below the 1.4335 area could see the USD/CAD pair accelerate downward towards the 1.4240 intermediate support, en route to the 1.4200 and 1.4150 regions. Conversely, if momentum extends beyond the 1.4500 psychological barrier, it could propel the pair towards the 61.8% Fibonacci level, indicating further bullish potential.
US Treasury bond yields have rebounded, providing a supportive tailwind for the US Dollar (USD) and, by extension, the USD/CAD pair. This rebound underpins market sentiment as it influences currency valuations. Concurrently, oil price dynamics play a crucial role in shaping market expectations, specifically regarding interest rate decisions by the Bank of Canada (BoC). A slight acceleration in Canadian consumer inflation has contributed to reduced bets for another BoC interest rate cut in March, adding another layer to the market's complexity.
The USD/CAD pair's movements are also swayed by President Donald Trump's tariff plans, which exert pressure on the Canadian Dollar (CAD), acting as an additional tailwind for the currency pair. Market participants are keenly observing these developments, especially as they coincide with key economic indicators from the United States.
Economic data releases from the US, including the Prelim Q4 GDP print, Durable Goods Orders, Pending Home Sales, and Weekly Initial Jobless Claims, are poised to impact the USD/CAD pair's trajectory. The upcoming US Personal Consumption Expenditure (PCE) Price Index release on Friday remains a focal point, with potential implications for currency movements.
A break above the 1.4365-1.4370 region could see the USD/CAD pair eyeing the 1.4470 area or the 50% Fibonacci retracement level. This potential breakout is under scrutiny by traders assessing the shifting dynamics and market sentiment.
Furthermore, speeches by influential members of the Federal Open Market Committee (FOMC) are expected to drive demand for the USD, influencing the currency pair's performance. These speeches provide insights into future monetary policy directions and economic outlooks.
President Trump's conflicting messages on tariffs have led to a sustained recovery of the US Dollar, adding another dimension to the market's analysis of current trends. These messages contribute to an environment of uncertainty that traders must navigate when making strategic decisions regarding currency positions.