The Loonie instantly recovered around 30 pips from the early European session low and shot to the 1.27 price region in the last hour.
The USDCAD pair enticed some buying near the 1.2640 area on Thursday and for now, seems to have halted this week’s retracement drop from the highest level since late September. Crude oil prices have moved further apart from the weekly high touched the previous day and undermined the commodity-linked pair. This, in turn, was seen as a key factor that acted as a tailwind for the Loonie pair.
In the meantime, the prospects for an early policy tightening by the Fed helped limit any significant US dollar profit-taking slide and further extended some support to the USDCAD pair.
The markets have been pricing the opportunity for an last Fed rate hike move by July 2022 amid persistent inflationary pressures. The bets were reinforced by the FOMC minutes released on Wednesday. That said, traders might be unwilling to place aggressive trades amidst comparatively thin liquidity conditions due to the Thanksgiving holiday in the US.
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