- USD/CAD edged lower on Monday and snapped four days of the winning streak.
- A turnaround in the risk sentiment prompted some profit-taking around the USD.
- A modest uptick in oil prices underpinned the loonie and contributed to the slide.
The USD/CAD pair edged lower through the mid-European session and dropped to fresh daily lows, closer to the 1.2400 round-figure mark in the last hour.
The pair struggled to capitalize on last week’s strong bullish momentum and witnessed a modest pullback from near two-month tops, around the 1.2485 region touched earlier this Monday. This marked the first day of a negative move in the previous five and forced the USD/CAD pair to erased a part of its gains recorded on Friday.
As investors digested a sudden hawkish turn by the Fed, the US dollar witnessed some profit-taking and moved away from two-and-half-month tops. A sharp turnaround in the global risk sentiment – as depicted by a solid bounce in the equity markets – weighed on the safe-haven USD and exerted some downward pressure on the USD/CAD pair.
Apart from this, a generally positive tone around crude oil prices undermined the commodity-linked loonie and further contributed to the offered tone surrounding the USD/CAD pair. Oil prices remained supported by expectations for a strong pickup in fuel demand and a pause in talks to revive the Iran nuclear deal.
Despite the negative factor, the downside is likely to remain cushioned, at least for the time being, warranting some caution for bearish traders. The Fed’s signal that it might raise interest rates at a much faster pace than anticipated previously should continue to act as a tailwind for the greenback and extended some support to the USD/CAD pair.
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 USD. Apart from this, oil price dynamics will be looked upon for some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch