US dollar tumbled to one-month low against its Canadian counterpart on Wednesday, as market sentiment recovered. Today was the fifth day in a row of gains for the Canadian currency, the longest streak since April. On Tuesday USD/CAD pair was largely sold off after concerns about central banks plans for easing policy.
USD/CAD fell to a session low at 1.0154 during the early phase of US trade. This value was the pairs lowest since May 16th. Consolidation followed at 1.0170. Support was expected at May 16th low, 1.0147, while resistance was to be met at current session high, 1.0219.
Investors risk appetite recovered on Wednesday after shares, bonds and the US dollar recorded significant losses on Tuesday after Bank of Japan abstained from implementing measures to ease government bond market volatility. On the other hand, Canadian and US government 10-year securities yielded about 2.19%, while Benchmark US notes had yielded about 9 basis points more at the end of May.
“If you have a higher-yielding currency, then you’ll have investors moving in — so that places a bid into the Canadian currency,” Mazen Issa, Canada macro strategist at Toronto-Dominion Bank’s TD Securities said, cited by Bloomberg.
Since Japans central bank took no action and expectations that the Federal Reserve Bank will begin to taper its 85 billion US dollar-a-month bond purchases later this year, concerns appeared what will be central banks future plans for stimulus programs.
Meanwhile, a series of crucial indicators are expected to be released on Thursday, especially Canadian New Housing Price Index (NHPI) along with Retail Sales and Business Inventories from the United States, which could cause volatility of the USD/CAD pair.
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