- USD/CAD staged a modest intraday recovery from the vicinity of the 1.2600 mark.
- Sustained USD selling bias might hold bullish traders from placing aggressive bets.
- Bullish crude oil prices should underpin the loonie and also collaborate to cap gains.
The USD/CAD pair built on its steady intraday bounce from near multi-week lows and inched back closer to mid-1.2600s during the early European session.
The pair managed to find decent support just ahead of the 1.2600 round-figure mark and for now, seems to have stalled its recent downward trajectory witnessed over the past three weeks or so. The uptick lacked any obvious catalyst and could be categorized as a short-covering move, which runs the risk of fizzling out rather quickly.
The prevalent upbeat market mood – as depicted by the ongoing rally in the equity market – continued weighing on the safe-haven US dollar. The progress in COVID-19 vaccinations, along with expectations for a massive US fiscal spending plan has been fueling the optimism about a strong global economic recovery and boosting investors’ confidence.
Even the continuous surge in the US Treasury bond yields also did little to provide any respite to the greenback. In fact, the yield on the benchmark 10-year US bond jumped to the highest level since February 2020 amid the prospects for the passage of President Joe Biden’s proposed $1.9 trillion coronavirus stimulus package.
On the other hand, an extension of the recent bullish run in crude oil prices could underpin the commodity-linked loonie and further contribute to cap gains for the USD/CAD pair. This makes it prudent to wait for some strong follow-through buying before traders start positioning for any meaningful recovery for the major.
There isn’t any major market-moving economic data due for release on Tuesday, either from the US or Canada. Hence, the broader market risk sentiment will play a key role in influencing the USD. Apart from this, the US bond yields and oil price dynamics will also be looked upon to grab some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
Share
