By Ketki Saxena
Investing.com -- The Canadian dollar weakened against its US counterpart today as an uptick in treasury yields supported the greenback. Falling crude prices and expectations that the Bank of Canada is nearing its terminal rate served as headwinds for the loonie The BoC is expected to reach its terminal rate before the Federal Reserve, and hold a lower rate than the Fed will maintain.
The greenback was supported today by a rise in treasury yields amid jittery risk sentiment amidst signs of weakness in consumer spending as Black Friday kicked off. US equities traded mixed, with shares of Apple (NASDAQ:AAPL) weighing on the Nasdaq and the retail section as a whole.
The commodity-linked loonie meanwhile was pressured by a decline in crude prices, as mounting Covid-19 cases in China weighed on crude demand by approximately 1 million barrels per day. The expectation of the EU price cap on Russian crude also weighed on crude prices.
The Canadian dollar was also pressured by expectations for the Bank of Canada to slow its pace of rate hikes, with economists at RBC (TSX:RY) expecting a 25 bp move in December.
Analysts at FX street note that while the USD/CAD “bounces off the weekly low touched earlier this Friday, though lacks follow-through” as the Fed is also widely expected to slow the pace of its policy tightening (although it will hold rates higher and longer than the Canadian central bank). These expectations are “holding back the USD bulls from placing aggressive bets and capping the upside for the major.”
Analysts at Scotiabank (TSX:BNS) also note that “Upside potential looks pretty limited, with evidence of better USD selling pressure emerging around or above 1.34 in recent days.”
On a technical level, the Scotia analysts note that “Short-term trading patterns show the USD finding good support on minor dips to the 1.3315/20 zone over the past 24 hours and a snap higher in European trade has put a positive print on the intraday chart for the USD from around that point.”
Looking ahead for the pair, “The USD appears to be consolidating ahead of another push lower (bear flag pattern); key support is 1.3320 intraday and resistance is 1.3395/00.”