- Falling oil prices undercut the loonie and helped the USD / CAD gain some traction on Monday.
- The nervousness of COVID-19 fueled some safe haven flows to the USD and provided an additional boost to the pair.
- Uncertainty about the Fed’s phase-down plan could limit the USD, justifying caution from aggressive bulls.
The pair USD / CAD It rallied to multi-day highs around the 1.2565 region in the past hour, with the bulls making a fresh attempt to take advantage of momentum beyond the very important 200-day SMA.
A combination of factors helped the USD / CAD pair capture some new offers on the first day of a new trading week and eventually broke a three-day trading range. A sharp drop in crude oil prices, now down nearly 3% on the day, undercut the Canadian dollar pegged to commodities. This, coupled with a modest pickup in demand for US dollars, provided a modest boost to the principal.
Oil prices lost ground for the third consecutive session amid concerns about the economic consequences of the rapidly spreading Delta variant of the coronavirus and the effects this will have on global fuel demand. Market concerns were further fueled by disappointing Chinese macroeconomic data, which pointed to a surprisingly sharp slowdown in the world’s second-largest economy.
Meanwhile, the lingering nervousness of COVID-19 took its toll on global risk sentiment. This was evident from the risk aversion momentum in the markets, which boosted some safe-haven flows to the US dollar. This was seen as another factor that contributed to the bid tone surrounding the USD / CAD pair. That said, the uncertainty about the Fed’s phase-down plan could limit gains for the USD.
Signs of easing inflationary pressure in the US and a drop in US consumer confidence forced investors to reduce their bets for an early policy adjustment by the Fed. in turn, it warrants some caution for aggressive bull traders and before positioning for any further appreciation movement amid the absence of relevant economic releases to move the market.
Technical levels
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