- USD/CAD attracted some dip-buying near the 1.2780 region amid a pickup in the USD demand.
- A fresh leg up in the US bond yields helped revive demand for the USD and remained supportive.
- Rallying oil prices might underpin the loonie and keep a lid on any runaway rally for the major.
The USD/CAD pair recovered around 50 pips from daily swing lows and was last seen trading with modest losses, around the 1.2825-30 region.
Signs of progress towards additional US stimulus measures triggered a fresh leg up in the US Treasury bond yields. This, in turn, helped revive the US dollar demand and assisted the pair to find decent support near the 1.2780 region. It is worth reporting that Democrats on Monday filed a $1.9 trillion budget measure in a step toward bypassing Republicans and eventual passage of President Joe Biden’s COVID-19 relief package.
Meanwhile, renewed optimism over a massive US economic stimulus lifted hopes for a strong global economic recovery. Apart from this, positive news related to the development of COVID-19 vaccines further boosted expectations for fuel demand recovery. This was evident from a strong intraday rally in crude oil prices, which underpinned the commodity-linked loonie and kept a lid on any meaningful recovery for the USD/CAD pair.
In fact, Reuters reported on Tuesday – citing the peer-reviewed trial data – that the Sputnik V coronavirus vaccine developed in Russia showed an effectiveness rate of 91.6% in the phase-3 trial. The news helped offset a downbeat OPEC report. The organization on Tuesday lowered its oil demand growth forecast for 2021 to 5.6 million barrels per day (bpd) from 5.9 million bpd estimated in January’s report.
It will now be interesting to see if the USD/CAD pair is able to capitalize on the move or continues with its struggle to build on the momentum beyond mid-1.2800s. In the absence of any major market-moving economic releases, either from the US or Canada, the USD/oil prices dynamics will be looked upon for some trading impetus.
Technical levels to watch
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