- USD/CAD gained some positive traction on Monday amid a pickup in the USD demand.
- The continuous upsurge in the US bond yields extended some support to the greenback.
- The ongoing bullish run in oil prices might underpin the loonie and cap gains for the pair.
The USD/CAD pair maintained its bid tone through the early European session and was last seen hovering near the top end of its daily trading range, around the 1.2775-80 region.
The pair managed to regain some positive traction on the first day of a new trading week and recovered a part of the previous session’s intraday fall to the 1.2755-50 support area. The uptick was exclusively sponsored by resurgent US dollar demand, though the ongoing bullish run in oil prices could underpin the commodity-linked loonie and cap gains for the USD/CAD pair.
Friday’s rather unimpressive NFP report, showing that the US economy added 49K jobs in January, strengthened the case for more fiscal support. The likelihood for a massive US stimulus plan increased further after the US Senate approved a budget resolution to fast track President Joe Biden’s proposed $1.9 trillion coronavirus relief plan to be approved without Republican support.
Meanwhile, expectations for a larger government borrowing to fund the stimulus pushed the yield on the benchmark 10-year US bond to near one-week highs. This, in turn, helped revive demand for the USD. Apart from this, progress in coronavirus vaccinations and hopes for a strong economic further benefitted the greenback and extended some support to the USD/CAD pair.
Meanwhile, the optimistic economic outlook boosted hopes for a recovery in the fuel demand. This, along with Saudi Arabia’s pledge for extra supply cuts in February and March, lifted oil price higher to their highest level in just over a year. This might hold bulls from placing aggressive bets and turned out to be the only factor capping gains for the USD/CAD pair.
There isn’t any major market-moving economic data due for release on Monday, either from the US or Canada. This further makes it prudent to wait for some follow-through buying before positioning for any further appreciating move. In the meantime, the US bond yields might influence the USD price dynamics and produce some trading opportunities around the USD/CAD pair.
Technical levels to watch
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