- USD/CAD bounce back from three-year lows is stalling amid dollar weakness and resilient CAD.
- Gold is under pressure after a recent spike to four-month highs above $1900.
- US equity indices have turned bullish amid easing inflation concerns.
USD/CAD bounce back from three-year lows is experiencing some resistance amid broader US dollar weakness and a softer tone around oil prices. In recent weeks, the pair has been under pressure on the dollar, losing ground against the majors amid inflation concerns and the loonie strengthening on improved Canada’s economic outlook.
The pair has found support above the 1.2011 level from where bulls have threatened to fuel a rally.
However, bulls continue to experience strong resistance near the 1.2142 level. A breach of the resistance level depends on whether the dollar will bounce back after a recent sell-off to three months lows.
Further gains in the USD in the pair are being curtailed by ongoing concerns in the currency market regarding whether the Federal Reserve will move forth and start tapering asset purchases. On the other hand, the Canadian dollar remains well supported by oil prices finding support above the $60 a barrel level in recent weeks.
Looking ahead focus is on the US, given the plethora of economic releases on the pipeline. Home sales reports, GDP data, and weekly jobless claims are some of the releases likely to weigh heavily on the USD, consequently USD/CAD.
The Australian dollar is also attracting some bids against the dollar supported by impressive economic releases. Encouraging news from the construction sector is the catalyst offering support, consequently fuelling a rally in the AUD/USD.
Construction work done came in at 2.4% above consensus estimates of 2.2%. However, the pair remains in consolidation mode at the 0.7745 level and in dire need of a new catalyst to continue edging higher amid the broader dollar weakness.
A gold rally above $1900 appears to have run out of steam in the aftermath of US yields rising. The precious metal had initially erased its entire 2021 losses on powering to four months highs of $1913. However, it has since retreated, finding support near the $1890 level.
The precious metal remains susceptible to a steeper pullback, given that all the key indicators signal it is heavily overbought at current levels. Similarly, rising US yields should continue to pile pressure on the precious metal on fuelling dollar strength.
US equities rally
Major US indices turned bullish on Wednesday as Federal Reserve officials helped calm persistent inflation fears. A dip in bond yield was the catalyst behind the tech-heavy Nasdaq rally, registering the third consecutive day of gains.
Nasdaq climbed 0.6% to 13,738 as the Dow jumped 10.59 points to 34,323 as the S&P 500 ended the day in the green after a 0.2% gain to 4195.
The catalyst behind the gains was the Fed vice chair downplaying the effects of higher price pressures and touting the Fed’s ability to steer the economy to a soft landing.
The Fed sentiments helped calm unending fears of rising inflation that have fuelled concerns of the Fed hiking interest rates. The Fed raising interest rates will more than likely fuel a spike in borrowing costs, derailing economic recovery.
Bitcoin bounce back
Bitcoin is hovering near the $40,000 level in the cryptocurrency market, turning out to be a key resistance level after a recent slide lower. BTC/USD has struggled to rise and find support above the key psychological level after climbing briefly and retreating lower.
The $36,500 level has emerged as a key support level from where the pair has continued to bounce back on sell-offs. Gains in the flagship cryptocurrency have been limited this week in the aftermath of authorities in China and the US moving to tighten crypto regulation on tax compliance.
China has imposed a total ban on crypto mining and trading, imposing the rules enforced in 2017/ The US, on its part, has confirmed it will start imposing stricter tax compliance on all crypto dealings.