- USD/CAD eases from intraday top while consolidating Friday’s losses.
- WTI weakness, cautious sentiment ahead of Canadian budget, the first in two years, propel the pair.
- Market sentiment dwindles amid quiet trading, chatters over US Infrastructure spending, covid gain attention off-late.
Despite stepping back from the intraday top of 1.2518, USD/CAD prints 0.06% gains on a day while staying above the 1.2500 during Monday’s Asian session. In doing so, the loonie pair benefits from the recent weakness in oil prices as well as worries over the first Canadian budget in two years.
As Canada’s Finance Minister Chrystia Freeland is up for presenting her first budget at 20:00 GMT, speculations mount over the government’s stimulus and taxes during what is likely to be an election year. Amid these plays, Reuters came out with the news, depending upon anonymous sources, suggesting no wealth tax but duties for online platforms and e-commerce warehouses as well as digital services tax for Web giants. The news also mentioned, “C$100 billion in stimulus over three years to ‘jump-start’ an economic recovery” while also quoting Toronto Star as reporting C$12 billion in the budget to extend its main pandemic support measures.
On the other hand, WTI drops 0.33% intraday by the press time while staying below $63.00. Given the Canadian economy’s heavy reliance on oil exports, WTI moves have a direct correlation with the Canadian dollar.
It’s worth mentioning that a 0.30% loss on a day by the S&P 500 Futures and the US dollar index (DXY) bounce off a one-month low also favor the USD/CAD strength.
Behind the latest risk-off mood could be likely challenges for US President Joe Biden’s $2.25 trillion aid packages as well as the coronavirus (COVID-19) fears emanating from Europe and India. Additionally, the US-Russia and the Sino-American tussles are also likely to have weighed on market sentiment. On the contrary, speedy vaccinations in the UK and the US battle the bears.
Although Canadian budget updates will be the key for USD/CAD, other risk catalysts shouldn’t be ignored amid a light calendar on Monday.
Technical analysis
Following its failure to cross 50-day SMA, around 1.2590 by the press time, during the early month recovery, USD/CAD looks set to revisit February lows near 1.2470.
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