- USD / CAD is making a modest intraday recovery from near the 1.2600 level.
- The USD’s sustained sell bias could prevent the bulls from opening aggressive positions.
- Bullish crude oil prices should prop up the CAD and also help limit the pair’s gains.
The pair USD / CAD has built on its steady intraday bounce from multi-week lows and it has now risen close to the region of 1.2650 during the European session.
The pair has achieved find decent support just above the round 1.2600 level and, for now, it appears to have halted its recent downward movement observed over the past three weeks. The rally has lacked an obvious catalyst and could be classified as a short hedging move, which risks fading away rather quickly.
The optimistic sentiment prevailing in the marketAs the current rally in stock markets shows, it has continued to weigh on the safe-haven US dollar. The Progress on COVID-19 Vaccines, Along with Expectations for a Massive U.S. Fiscal Spending Plan, has fueled optimism about a strong global economic recovery and increased investor confidence.
Even the continued rise in US Treasury yields hasn’t done much to give the USD a break either. In fact, the 10-year benchmark US bond yield has jumped to the highest level since February 2020 amidst prospects for approval of President Joe Biden’s $ 1.9 trillion coronavirus stimulus package.
On the other hand, an extension of the recent upward movement in crude oil prices could prop up the loonie, currency linked to commodity prices, and limit additional gains for the USD / CAD pair. This makes it prudent to wait for some solid continuation buying before investors start to position themselves for a significant rally in the pair.
There is no major economic data release on Tuesday, neither from the United States nor Canada. Therefore, the broader market risk sentiment will play a key role in influencing the USD. Apart from this, the focus will also be on US bond yields and oil price dynamics to seize some short-term trading opportunities around the USD / CAD pair.
USD / CAD technical levels
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