“¢ A sharp fall in the US bond yields exerts additional downward pressure on the USD.
“¢ The ongoing rally in oil prices further underpin Loonie and add to the selling bias.
The USD/CAD pair traded with a negative bias for the second consecutive session and held near two-week lows, set in the previous session.
The pair struggled to build on overnight late rebound from an intraday low level of 1.3160, with a combination of factors exerting some fresh downward pressure through the early European session on Tuesday.
Against the backdrop of the US-China trade truce, the US Dollar was further weighed down by a sharp fall in the US Treasury bond yields amid expectations of a possible pause in the Fed’s rate-hike cycle.
In fact, the yield on the benchmark US 10-year Treasury fell to its lowest level since mid-September and the spread between 2/10-year bond yields narrowed to the smallest level since July 2007.
Meanwhile, the ongoing positive momentum around crude oil prices, supported by expectations of OPEC-led output cuts, underpinned the commodity-linked Loonie and further collaborated to the pair’s weaker tone.
Moving ahead, there aren’t any major market-moving economic releases due today and hence, the key focus will remain on the BoC latest monetary policy update on Wednesday.
This coupled with the latest monthly jobs reports from the US – popularly known as NFP, and Canada will play an important role in determining the pair’s next leg of directional move.
Technical levels to watch
A follow-through selling pressure has the potential to continue dragging the pair towards 1.3125 intermediate support en-route the 1.3100 handle. On the flip side, the 1.3200 handle now becomes immediate strong resistance, above which the pair is likely to aim towards retesting the 1.3230-35 supply zone.
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