- USD/CAD gained traction for the second consecutive session on Wednesday.
- A modest uptick in the US bond yields, softer risk tone benefitted the USD.
- Subdued oil prices did little to influence the loonie or provide any impetus.
The USD/CAD pair edged higher through the Asian session and climbed to the 1.2600 neighbourhood, back closer to weekly tops in the last hour.
The pair built on the previous day’s positive move and gained some follow-through traction for the second consecutive session on Wednesday. The momentum assisted the USD/CAD pair to move further away from over two-week lows, around the key 1.2500 psychological mark touched on Monday and was sponsored by a modest US dollar uptick.
The greenback stalled its recent corrective slide from four-month tops and found some respite from a modest uptick in the US Treasury bond yields. Apart from this, a generally softer tone around the Asian equity markets extended some additional support to the greenback’s relative safe-haven status against its Canadian counterpart.
The greenback was further underpinned by the prospects for a relatively faster US economic recovery from the pandemic, thanks to the impressive pace of coronavirus vaccinations. This, along with US President Joe Biden’s infrastructure spending plan of more than $2 trillion, has been fueling speculations about an uptick in US inflation.
This, in turn, raised doubts that the Fed will retain ultra-low interest rates for a longer period. Hence, the focus will remain on the release of the FOMC meeting minutes, which will be closely scrutinized for clues if the conditions to begin tightening were discussed. This should remain supportive of the overall positive picture for the USD.
On the other hand, a subdued action around crude oil prices did little to influence the commodity-linked loonie or provide any meaningful impetus to the USD/CAD pair. The black gold, so far, has struggled to capitalize on the prospects for a stronger global economic growth and the overnight API report that showed inventories in the US fell last week.
Looking at the technical picture, a sustained move beyond the 1.2600 mark will be seen as a fresh trigger for bullish traders. The USD/CAD pair might then aim to surpass the 1.2625-30 intermediate resistance and aim to test the next major hurdle near the 1.2645-50 supply zone.
Technical levels to watch
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