USD/CAD hovers around 1.2590 during Friday’s Asian session. The pair has refreshed the multi-day peak on Thursday. Rebound of US dollar and bank holiday in Canada underpinned this move.

The strength of the US dollar can be linked to the Fed rate hike chatters and the sluggish prices of Canada’s main export item, WTI crude oil.

US Dollar Index (DXY) bulls has defended the 95.00 threshold and stayed around the highest level since July 2020, recently easing to 95.12 amid Friday’s Asian session favoring the US dollar.

Over a three-decade high in US inflation propelled Fed rate hike concerns and favored the US dollar of late.

Elsewhere, The Organization of the Petroleum Exporting Countries (OPEC) on Thursday had cut its world oil demand forecast for the fourth quarter by 330,000 barrels per day from last month’s forecast, as high energy prices curb the recovery from COVID-19. This news also favors the USD/CAD bulls.

According to CIBC, “markets have overpriced Bank of Canada (BoC) action in 2022, and underestimated the Federal Reserve post-2022”. “A recalibration”, continues the bank, “will leave the CAD out of favor with investors”, before concluding “we see USD/CAD drifting above the 1.30-mark next year, as it becomes clear that Canada’s central bank will not be outgunning the Fed”.

“Softer crude prices and a return to Canada’s usual travel deficit as tourism restarts will weigh on the country’s trade balance, which has been supportive for the loonie in recent quarters.”

USD/CAD 4 Hour Chart:

Support: 1.2501 (S1), 1.2426 (S2), 1.2378 (S3).

Resistance: 1.2623 (R1), 1.2671 (R2), 1.2745 (R3).

Amidst all the catalysts favoring greenback against loonie, we expect a bullish trend for USD/CAD.