USD/CAD struggles below 1.2680 amid higher oil prices

• The greenback is capped below 1.2680 after a three-day reversal from 1.2870. 
• The Canadian dollar appreciates on higher oil prices, softer US dollar.
• USD/CAD seen dropping further below 1.2650 – Scotiabank.

The US dollar is trying to pick up from two-week lows at 1.2650 seen earlier on Thursday yet, so far unable to break past 1.2680.

The Canadian dollar advances as oil prices pick up

The USD is set for a three-day decline against its Canadian counterpart. The pair has extended its reversal from week highs at 1.2870 to the mid-range of 1.2650, weighed on Thursday by a pick-up in crude prices that is underpinning the CAD.

Oil prices bounced up on Thursday, buoyed by renewed supply concerns after the International Energy Agency (IEA) warned that the decline in global demand caused by higher prices will not offset the shut-in of Russian supplies.

Beyond that, the US dollar is showing a weaker tone. US Treasury bonds, retreating from recent highs, are weighing on USD demand while the market seems little impressed after the Federal Reserve increased interest rates on Wednesday for the first time in three years.

USD/CAD: Further losses to be witnessed below 1.2650 –  Scotiabank

In the longer term, currency analysts at Scotiabank see the pair biased lower, and point out to a break of 1.2650 level: USD/CAD may continue to find support in the low/mid 1.26s for now but, at the very least, we see limited scope for USD/CAD gains at present and continue to prefer fading USD rallies (…) Upside momentum in the USD has waned in the past few session and broader signals suggest solid resistance above the market in the mid-1.28s.” 

Technical levels to watch