USD/CAD regains 1.2100 as US dollar extends corrective pullback

  • USD/CAD bounces off 2017 low amid fresh USD buying.
  • S&P 500 Futures print mild losses, US Treasury yields pause two-day uptrend.
  • Mixed sentiment concerning reflation fears and central bank actions join WTI pullback to favor the buyers.

USD/CAD picks up bids near 1.2100 during Tuesday’s Asian session. The Loonie pair refreshed the lowest levels since 2017, not to forget declining for the fourth consecutive day, the previous day.

Although the comparative advantage of the Bank of Canada’s (BOC) tapering backs the USD/CAD sellers, the pair’s latest bounce could be traced from the US dollar recovery amid market confusion. Friday’s optimism towards a sustained easy money policy from the US Federal Reserve (Fed), backed by Nonfarm Payrolls (NFP) debacle, couldn’t last long as traders seek confirmation. It’s worth mentioning that the US Fed policymakers flash mixed signals, with Dallas Fed President Robert Kaplan be the odd one favoring tapering, which in turn weighs on the market sentiment.

As a result, S&P 500 Futures track Wall Street’s losses while declining 0.11% by the press time. Further, the US 10-year Treasury yields ease around 1.60% after rising for the last two consecutive days. The risk-off mood favors the US dollar index (DXY) extend the previous day’s bounce off 10-week low marked on Friday.

Also, receding fears of the oil supply halt, due to the cyberattack on the US Colonial Pipeline, add to the USD/CAD upside moves as crude oil is Canada’s biggest export item.

That said, USD/CAD isn’t out of the woods as traders remain cautious ahead of Wednesday’s US inflation data and any disappointment from the same needs to be backed by the Fed policymakers to convince the pair buyers. Alternatively, a surprise slowdown in the Canadian covid jabbing and/or geopolitical risks could help the USD/CAD prices.

Technical analysis

Unless crossing a downward sloping trend line from September 2020 and 2018’s yearly low, around 1.2250-45, USD/CAD sellers may not refrain from attacking the 1.2000 psychological magnet.


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