On the back of broad-based USD strength, USD/CAD approaches the mid-1.3700s, approaching a two-week high

On Thursday, the USD/CAD pair recovers from an early decline to the 1.3680 zone and enters positive territory for the sixth consecutive trading day. During the beginning of the European session, spot prices achieve a one-and-a-half-week high towards the middle of the 1,3700s and appear poised to extend the recent rally from levels below 1,3500.

The underlying bullish sentiment surrounding the US dollar, bolstered by the Federal Reserve's more hawkish stance, appears to be a key factor sustaining the USD/CAD exchange rate. For the fourth consecutive time, the US central bank increased interest rates by 75 basis points to combat persistently rising inflation. In addition, Jerome Powell, the chairman of the Federal Reserve, dashed expectations for a dovish reversal by suggesting that interest rates would need to rise more than anticipated.

A further increase in US Treasury bond yields increases the prospect of further Fed policy tightening and continues to act as a tailwind for the currency. In addition, a lessening of risk sentiment provides additional support for the safe-haven dollar. A modest decrease in crude oil prices from their three-week high is anticipated to weaken the Canadian dollar, which is related to commodities prices. This, in turn, increases the chance of a further USD/CAD rise in the near future.

Even from a technical standpoint, the overnight spike following the FOMC meeting has pushed spot prices over the barrier zone of 1.3670-1.3685. A subsequent strength and acceptance over the 1.3700 level reinforces the bullish bias and favors bullish traders, indicating that the path of least resistance for the USD/CAD pair is to the upside. In conjunction with US bond yields, the US ISM Services PMI will propel the US usd and add momentum to the primary currency.