- USD/CAD gains strong follow-through traction on the first day of a new week.
- A slump in oil prices undermined the loonie and provided a strong lift to the pair.
- The risk-off mood benefitted the safe-haven USD and remained supportive.
The USD/CAD pair caught some fresh bids on the first day of a new week and shot to two-week tops, around the 1.3680-85 region in the last hour.
Following the previous session’s modest pullback, the pair managed to regain positive traction on Monday and built on last week’s goodish bounce from the vicinity of the 1.3300 mark, or three-month lows. A sharp fall in crude oil prices undermined demand for the commodity-linked currency – the loonie – and turned out to be one of the key factors driving the USD/CAD pair higher.
Fears about the second wave of the coronavirus outbreak and the possibility of renewed lockdowns to curb the spread dampened prospects for a sharp V-shaped economic recovery. This coupled with the Fed’s bleak outlook for the US economy raised scepticism about a swift recovery in the global oil demand. This, in turn, led to a steep fall of around 5% in oil prices on Monday.
Meanwhile, disappointing economic data from China added to renewed coronavirus jitters and dented the global risk sentiment. This was evident from a fresh leg down in the global equity markets, which extended some support to the US dollar’s perceived safe-haven status and remained supportive of the strong bid tone surrounding the USD/CAD pair.
It will now be interesting to see if bulls are able to capitalize on the momentum or opt to take some profits off the table, especially after the recent strong positive move of over 350 pips since last Wednesday.
In the absence of any major market-moving economic releases, the broader risk sentiment might continue to play a key role in influencing the USD’s safe-haven demand. This along with the oil price dynamics will contribute towards producing some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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