The USD/CAD pair has seen a modest bounce from the 1.3335 area and has continued to gain traction during the first half of trading on Thursday. The pair has maintained its bid tone heading into the European session, reaching a fresh daily high just above the 1.3400 round-figure mark in the last hour.
The demand for the US Dollar (USD) has increased, bringing it closer to the top end of its recent trading range observed over the past week or so. This factor is seen as lending support to the USD/CAD pair.
However, the intraday USD uptick runs the risk of fizzling out quickly in the absence of a fresh fundamental trigger, as the market expects the Federal Reserve (Fed) to near the end of its rate-hiking cycles.
The latest US CPI report released on Wednesday affirmed market expectations and further indicated signs of easing inflationary pressures. The concerns about the US debt ceiling have also contributed to dragging down the US Treasury bond yields and could hold back USD bulls from placing aggressive bets.
Additionally, the modest uptick in oil prices could underpin the commodity-linked Loonie and limit the upside for the USD/CAD pair.
From a technical perspective, spot prices have been oscillating within a familiar one-week-old trading range, indicating indecision among traders over the near-term trajectory.
Therefore, it is prudent to wait for strong follow-through buying before confirming that the USD/CAD pair has formed a near-term bottom and positioning for an extension of the recent recovery from the 1.3300 round-figure mark, or a two-month low touched on April 14.
Market participants are now looking at the US economic docket, which includes the release of the Producer Price Index (PPI) and the usual Weekly Initial Jobless Claims later during the early North American session.
The scheduled speech by Fed Governor Christopher Waller and US bond yields will also drive USD demand, along with oil price dynamics.
These factors should provide some impetus to the USD/CAD pair and enable traders to take advantage of short-term opportunities.
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