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  • Loonie losses strength as Wall Street fails to hold in positive ground.
  • DXY bounces to test daily highs as US yields climb further.

The USD/CAD erases daily losses and is back near the 1.2700 area after falling earlier to 1.2659, the lowest level since January 22. A recovery of the US dollar across the board boosted the pair.

Wall Street turns down, US yields up

Market sentiment deteriorated over the last hours. The Dow Jones failed to hold to gains and is falling by 0.21% while the Nasdaq is far from the high, still up 0.22%. In the bond market, US yields are higher. The 10-year yield is up near 3% at 1.158%.

Higher yields and deterioration in market sentiment help the US dollar. The DXY is testing the daily high at 90.45. Hours ago it dropped to the weekly low near 90.20.

The USD/CAD is about to test 1.2700 as price action gains speed in financial markets. In FX, still many currency pairs remain in limited ranges probably due to lack of volume considering it New Year holiday in China.

From a technical perspective, risks remain tilted to the downside in USD/CAD, but the greenback will likely strengthen if it holds above 1.2700. The next resistance is seen at the 20-day moving average at 1.2745. A daily close well below 1.2700 would point to further losses.

Technical levels