- USD/CAD witnessed some heavy selling for the second consecutive session on Friday.
- A broad-based USD weakness was seen as a key factor exerting pressure on the major.
- Disappointing Canadian data, a sharp pullback in oil prices did little to lend any support.
The USD/CAD pair continued losing ground through the early North American session and dived to the 1.2600 neighbourhood or one-month lows in the last hour.
The pair failed to capitalize on its early uptick, instead witnessed some aggressive selling near the 1.2715 region and extended this week’s rejection slide from 50-day SMA. The downfall was exclusively sponsored by the heavily offered tone surrounding the US dollar and seemed rather unaffected by disappointing Canadian Retail Sales data.
The headline sales dropped 3.4% MoM in December as against consensus estimates pointing to a fall of 2.5% and 1.3% growth recorded in the previous month. Adding to this, the core sales (excluding auto) plunged 4.1% during the reported month form a 2.1% increase in November. The data, however, did little to lend any support to the USD/CAD pair.
Bulls even shrugged off a sharp pullback in crude oil prices, which tend to undermine demand for the commodity-linked loonie. On the other hand, a goodish pickup in the US Treasury bond yields failed to provide any respite for the USD bulls or stall the USD/CAD pair’s sharp intraday downfall to the lowest level since January 21.
In fact, the yield on the benchmark 10-year US government bond jumped back closer to one-year tops amid firming expectations for a massive US fiscal spending plan. The prospects for the passage of President Joe Biden’s proposed $1.9 trillion stimulus package has been fueling hopes for a strong economic recovery and a possible acceleration in inflation.
Moving ahead, market participants now look forward to the release of the flash PMI prints (Manufacturing and Services PMI) and Existing Home Sales data from the US. This, along with the US bond yields, might influence the USD price dynamics and produce some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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