- A combination of factors prompted some follow-through selling around USD/CAD on Monday.
- The risk-on mood continued weighing on the safe-haven USD and exerted downward pressure.
- Rallying crude oil prices underpinned the loonie and further contributed to the offered tone.
The USD/CAD pair remained depressed through the early European session and was last seen trading around the 1.2670 region, just above multi-week lows.
The pair edged lower on the first day of a new trading week and extended Friday’s intraday fall of around 85-90 pips from the 1.2765 area. The downtick was sponsored by a combination of factors, though lacked any strong follow-through and the USD/CAD pair, so far, has managed to hold above multi-week lows support around the 1.2660 region.
The progress in the coronavirus vaccinations and hopes for a massive US fiscal stimulus plan has been fueling the optimism about a strong global economic recovery. This, in turn, remained supportive of the underlying bullish sentiment – as depicted by the continuation of a rally in the equity markets – and dented the US dollar’s safe-haven status.
The USD bulls failed to gain any respite, rather shrugged off the ongoing upsurge in the US Treasury bond yields. In fact, firming expectations for the passage of the US President Joe Biden’s proposed $1.9 trillion COVID-19 stimulus package pushed the yield on the benchmark 10-year bond back above the 1.20% for the first time since February 2020.
On the other hand, a strong pickup in crude oil prices underpinned the commodity-linked loonie and exerted some pressure on the USD/CAD pair. Oil prices remained well supported by hopes that easing of lockdown restrictions will lift the global fuel demand and got an additional boost from rising fears of heightened tensions in the Middle East.
There isn’t any major market-moving economic data due for release on Monday, either from the US or Canada. Hence, the broader market risk sentiment will play a key role in influencing the greenback. This, along with oil price dynamics, will also be looked upon to grab some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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