USD/CAD settled below 1.2385 and is trying to get to the test of the support at 1.2350.
The Canadian dollar rose for a second day against its broadly weaker U.S. counterpart on Tuesday, as investor sentiment strengthened after it was weakened last week by a hawkish shift in guidance from the Federal Reserve. "It's a broad U.S. dollar move again today," said Erik Bregar, head of FX strategy at the Exchange Bank of Canada. Canada is a major exporter of commodities, including oil and base metals, which have benefited from Fed stimulus.
Last week, the U.S. dollar broke out, strengthening versus the Canadian dollar (Loonie), but pulled back slightly from overbought territory on Monday.
The Canadian dollar notched its biggest gain in nearly seven weeks against the greenback on Monday, as oil soared and the Federal Reserve's more hawkish guidance supported expectations for Bank of Canada interest rate hikes. Oil, one of Canada's major exports, was boosted by a pause in talks to end U.S. sanctions on Iranian crude. U.S. crude oil futures settled up 2.8% at $73.66 a barrel, while the Canadian dollar was trading 0.9% higher at 1.2357 to the greenback, or 80.93 U.S. cents.
USD/CAD tested resistance at 1.2480.
The Canadian dollar weakened to its lowest level in nearly eight weeks against the greenback on Friday and posted its biggest weekly decline since March last year, as the Federal Reserve's more hawkish stance led to short-covering of U.S. dollars. For the week, it was down 2%, after ending lower in the three previous weeks. "We have seen some pretty material short-dollar positions in the market and we have seen traders rushing in to cover those shorts," said Andrew Cherry, head of global markets, HSBC Bank Canada.
It’s a relatively quiet day on the economic calendar. With the Pound back at sub-$1.40 against the Dollar, retail sales figures will need to impress to prevent further downside.
USD/CAD is testing the resistance level at 1.2350.
The Canadian dollar weakened for a third day against its broadly stronger U.S. counterpart on Thursday, after a hawkish shift in guidance by the U.S. Federal Reserve startled investors. "The Canadian dollar was hammered as the prospect of two U.S. rate hikes erased the advantage the currency had benefited from when it was just the Bank of Canada forecasting rate increases," Rahim Madhavji, president at KnightsbridgeFX.com, said in a note. A majority of 11 Fed officials penciled in at least two quarter-point rate increases for 2023 in a surprise move on Wednesday, boosting the U.S. dollar to a two-month high against a basket of major currencies.
It’s a relatively busy day on the economic calendar after impressive stats from NZ and Australia. Economic data from the Eurozone and the U.S will be in focus.