- USD/CAD continued with its struggle to register any meaningful recovery from multi-year lows.
- Dovish Fed expectations, sliding US bond yields weighed on the USD bulls and capped gains.
- Softer crude oil prices undermined the loonie and helped limit losses amid coronavirus jitters.
The USD/CAD pair retreated around 25-30 pips from daily tops and refreshed session lows in the last hour, with bears now eyeing weakness below the 1.2100 mark.
The pair struggled to capitalize on its modest Asian session uptick to the 1.2135 region and remained well within the striking distance of near six-year lows touched last week. A combination of factors held the USD dollar bulls from placing any aggressive bets and capped the upside for the USD/CAD pair. However, a softer tone around crude oil prices undermined the commodity-linked loonie and helped limit any deeper losses, at least for the time being.
The USD was being weighed down by Friday’s disappointing US Retail Sales data, which reaffirmed the Fed’s dovish view and forced investors to trim their bets for an earlier than anticipated tightening. This, along with the ongoing decline in the US Treasury bond yields, further acted as a headwind for the greenback. That said, worries about the continuous surge in new coronavirus cases in Asia might extend some support to the safe-haven greenback.
From a technical perspective, the recent price action over the past one week or so might still be categorized as consolidative. Apart from this, the USD/CAD pair’s inability to register any meaningful recovery suggests that the near-term bearish trend might still be far from being over. This, in turn, indicates that the path of least resistance remains to the downside. Hence, any attempted recovery might still be seen as an opportunity for bearish traders.
There isn’t any major market-moving economic data due for release on Monday, either from the US or Canada, leaving the USD at the mercy of the US bond yields. Traders might further take cues from the broader market risk sentiment and oil price dynamics to grab some short-term impetus. The key focus, however, will remain on the release of FOMC monetary policy meeting minutes on Wednesday, which will be looked upon to determine the next leg of a directional move.
Technical levels to watch
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