- A combination of factors assisted USD/CAD to reverse an early dip to the 1.2625-20 region.
- The upbeat US economic outlook, rallying US bond yields continued underpinning the USD.
- A modest pullback in oil prices weighed on the loonie and remained supportive of the uptick.
The USD/CAD pair managed to recover over 50 pips from intraday lows and was last seen trading with modest gains, around the 1.2675 region during the early European session.
The pair attracted some dip-buying near the 1.2625-20 region and stalled its sharp retracement slide from the 1.2740 supply zone, tested in reaction to the stunning US monthly jobs report on Friday. The intraday uptick was exclusively sponsored by the emergence of some fresh buying around the US dollar.
The USD stood tall near three-month tops and remained well supported by the prospects for a faster US economic recovery. Adding to this, a fresh leg up in the US Treasury bond yields further underpinned the greenback and extended some support to the USD/CAD pair on the first day of a new week.
The US fixed income market reacted to the passage of a massive US fiscal spending bill. The US Senate on Saturday voted 50-49 in favour of the US President Joe Biden’s $1.9 trillion pandemic aid package and pushed the yield on the benchmark 10-year bond back closer to 1.6%, or over one-year highs.
Meanwhile, oil prices trimmed a part of the early strong gains and weighed on the commodity-linked loonie, extending some additional support to the USD/CAD pair. It is worth reporting that WTI jumped to the highest since October 2018 amid reports of attacks on Saudi Arabia’s oil industry on Sunday.
There isn’t any major market-moving economic data due for release on Monday, either from the US or Canada. This, in turn, leaves the USD/CAD pair at the mercy of the USD/oil priced dynamics. That said, it will be prudent to wait for some follow-through buying before positioning for any meaningful gains.
Technical levels to watch
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