- USD/CAD staged a solid intraday bounce from sub-1.2600 levels, or weekly lows.
- Surging US bond yields benefitted the USD and remained supportive of the move.
- Bullish oil prices underpinned the loonie and kept a lid on any meaningful gains.
The USD/CAD pair rallied over 60 pips from weekly lows and jumped to fresh daily tops, beyond mid-1.2600s during the early North American session.
The pair showed some resilience below the 1.2600 round-figure mark and witnessed a dramatic intraday turnaround amid resurgent US dollar demand. A sudden pickup in the US Treasury bond yields provided a strong lift to the greenback, which, in turn, was seen as a key factor that prompted some short-covering around the USD/CAD pair.
A violent selloff in the US Treasuries took its toll on the global risk sentiment. This was evident from a steep fall in the equity markets, which provided an additional boost to the safe-haven greenback. The USD bulls seemed unaffected, rather shrugged off the disappointing release of the ADP report for February.
In fact, private-sector employers added 117K jobs during the reported month, fewer than 177K expected and the previous month’s upwardly revised reading of 195K. The data pointed to a sluggish recovery in the labour market, though investors remained optimistic amid the progress on a massive US fiscal spending plan.
That said, bullish sentiment around crude oil prices, now up over 1.5% for the day, underpinned the commodity-linked loonie and capped gains for the USD/CAD pair. This makes it prudent to wait for a sustained move beyond the 1.2660 region before positioning for an extension of the recent bounce from multi-year lows.
Wednesday’s US economic docket also features the release of the ISM Services PMI. This, along with the US bond yields and the broader market risk sentiment, will influence the USD. Traders might further take cues from oil prices dynamics to grab some meaningful opportunities.
Technical levels to watch