- USD/CAD regained positive traction for the third consecutive session on Thursday.
- Bullish crude oil prices underpinned the loonie and kept a lid on any further upside.
- Sliding US bond yields further held the USD bulls on the defensive and capped gains.
The USD/CAD pair traded with a mild positive bias through the early European session and was last seen trading near daily tops, just above the 1.2700 round-figure mark.
Following the previous day’s rejection slide of around 45-pips from 50-day SMA, around mid-1.2700s, the pair managed to regain some positive traction for the third consecutive session on Thursday. Bulls might now be looking to build on the this week’s goodish rebound from the vicinity of the 1.2600 mark, though a combination of factors might keep a lid on any strong gains for the USD/CAD pair.
The US Treasury bond yields witnessed a modest pullback and held the US dollar bulls from placing aggressive bets. It is worth reporting that investors remain optimistic about a relatively faster US economic recovery from the pandemic, along with a possible acceleration in inflation pushed the yield on the benchmark 10-year bond to the 1.33% on Wednesday, or the highest level in over a year.
Wednesday’s upbeat US monthly Retail Sales figures were seen as the first sigh of the strength in the US economic outlook. This, along with the impressive pace of COVID-19 vaccinations, the slowing pace of infections and progress on the US President Joe Biden’s proposed $1.9 trillion stimulus package supported the view that the US economy will see a faster recovery than its global peers.
On the other hand, an extension of the bullish run in crude oil prices might continue to lend support to the commodity-linked loonie. In fact, the black gold hit 13-month tops on Thursday amid concerns that a rare cold snap in Texas could disrupt US crude output for days or even weeks prompted fresh buying. This might act as another factor capping the upside for the USD/CAD pair, at least for now.
This makes it prudent to wait for some strong follow-through buying beyond the 50-day SMA barrier before confirming that the USD/CAD pair has bottomed out in the near-term. This, in turn, will set the stage for a further appreciating move and push the pair back towards the 1.2800 mark.
Market participants now look forward to the US economic docket, featuring the release of Philly Fed Manufacturing Index, the usual Initial Weekly Jobless Claims and housing market data. Traders might further take cues from the US bond yield dynamics, which will play a key role in influencing the USD and produce some short-term opportunities around the USD/CAD pair.
Technical levels to watch
Share
