- USD/CAD regained positive traction on Wednesday and recovered a part of the overnight losses.
- A modest pickup in the US bond yields helped ease the bearish pressure surrounding the USD.
- An uptick in oil prices might underpin the loonie and keep a lid on any further gains for the pair.
The USD/CAD pair edged higher through the early European session and shot to fresh daily tops, around the 1.2560 region in the last hour.
The pair managed to regain some positive traction on Wednesday and recovered a part of the previous day’s losses. It is worth mentioning that the USD/CAD pair on Tuesday witnessed a dramatic intraday turnaround and tumbled around 100-pips from the 1.2625-30 supply zone amid a broad-based US dollar selloff.
The latest US consumer inflation figures failed to provide any evidence of broadening price pressures and reinforced the Fed’s view that higher inflation will be transitory. This, along with strong auction results of 30-year bonds, triggered a sharp fall in the US Treasury bond yields and weighed on the USD.
Meanwhile, the US Food and Drug Administration (FDA) recommended pausing the rollout of Johnson & Johnson’s coronavirus vaccine after six women developed rare blood clots. This was seen as another factor that aggravated the bearish pressure surrounding the USD and dragged the USD/CAD pair back closer to weekly lows.
As investors looked past Tuesday’s rather unimpressive US CPI report, a modest uptick in the US Treasury bond yields assisted the USD to stage a modest bounce from three-week lows. This, in turn, was seen as a key factor that assisted the USD/CAD pair to attract some dip-buying near the 1.2525-30 support zone.
That said, a pickup in crude oil prices might underpin the commodity-linked loonie and keep a lid on any strong gains for the USD/CAD pair. Hence, it will be prudent to wait for some strong follow-through buying before positioning for any further upside amid absent relevant market moving economic releases.
Market participants now look forward to Fed Chair Jerome Powell’s scheduled speech later during the US session. In the meantime, the US bond yields will play a key role in influencing the USD. Apart from this, oil price dynamics might further contribute to produce some trading opportunities around the USD/CAD pair.
Technical levels to watch
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