USD/CAD remains heavy below 1.2700 as WTI sellers lack follow through

• USD/CAD stays red for the third consecutive day, prints heaviest losses in a week off-late.
• WTI regains upside momentum with a bounce from around $64.50.
• Risks remain positive as US stimulus is up for voting in the House, Treasury yields stay stronger.
• BOC eyed even as no fireworks are expected from Macklem and company.

USD/CAD wavers around an intraday low of 1.2654, currently down 0.13% on a day near 1.2660, amid Tuesday’s Asian session. In doing so, the quote drops for the third day while taking clues from the WTI’s latest strength.

Although profit-booking joined the US dollar’s rally to pullback the oil benchmark back from a 29-month high, the black gold regains upside momentum amid market optimism ahead of the much-awaited US fiscal stimulus. Having gained the Senate’s approval for US President Joe Biden’s $1.9 trillion covid aid package, the bill will be voted in the House on Tuesday and is likely to cross the hurdles with only a few barriers before turning into the law.

While the stimulus hopes propel the risks, US Treasury yields rally on reflation fears, which in turn favor the US dollar. However, the Canadian dollar seems to take clues from the commodity’s five-month rally.

Also favoring the USD/CAD bears could be the market optimism ahead of this week’s Bank of Canada (BOC) meeting. The Canadian central bank isn’t expected to offer any monetary policy change during Wednesday’s meeting. Though, the rate statement will be closely observed to get the hints of economic recovery after Governor Tiff Macklem praised economic moves during late February.

Read:  Week ahead: ECB and Bank of Canada rate meeting, UK monthly GDP, Rolls Royce, ITV, Morrison and AMC

It should be noted that the passage of the US stimulus on Tuesday and the following market reaction to the BOC seem to keep the USD/CAD bears hopeful as energy prices are up for further gains amid expected economic recovery and OPEC+ supply.

Technical analysis

A downward sloping trend line from October 2020, currently around 1.2680 favors USD/CAD sellers to eye the fresh multi-month low, below the latest 1.2468 marked in February.