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  • USD/CAD struggled to preserve its intraday gains and retreated back below the 1.2500 mark.
  • Retreating US bond yields kept the USD bulls on the defensive and exerted some pressure.
  • Weaker crude oil prices undermined the loonie and helped limit losses amid the risk-off mood.

The USD witnessed some selling during the early European session and dragged the USD/CAD pair to fresh daily lows, around the 1.2490 region in the last hour.

The pair failed to capitalize on its weekly bullish gap opening, instead met with some fresh supply and retreated around 45 pips from the daily swing highs near the 1.2533 area. The yield on the benchmark 10-year US government bond extended its pullback from over one-year tops touched last week. This was seen as a key factor that held the US dollar bulls from placing aggressive bets and kept a lid on any strong gains for the USD/CAD pair.

That said, a combination of factors might continue lending some support to the greenback and help limit any deeper losses for the USD/CAD pair. Investors remain optimistic about the prospects for a relatively faster US economic recovery following the passage of a massive stimulus package. Apart from this, the prevalent cautious mood around the equity markets could further benefit the USD’s relative safe-haven status against its Canadian counterpart.

Meanwhile, fresh concerns that a new wave of COVID-19 infections and pandemic-related lockdown in Europe may slow an anticipated recovery in demand for fuel products weighed on crude oil prices. In fact, WTI was down over 0.50% for the day, which undermined the commodity-linked loonie and could also extend some support to the USD/CAD pair. This, in turn, warrants some caution before positioning for any further intraday depreciating move.

Monday’s US economic docket features the only release of Existing Home Sales data. Hence, the key focus will remain on Fed Chair Jerome Powell’s comments and speeches by influential FOMC members. Apart from this, the broader market risk sentiment and the US bond yields will influence the USD later during the early North American session. Traders will further take cues from oil price dynamics to grab some short-term opportunities.

Technical levels to watch