- USD / CAD gains some positive traction on Monday amid a rebound in USD demand.
- The continued rally in US bond yields offers some support for the USD.
- The current upward movement in oil prices could prop up the CAD and limit the pair’s gains.
The pair USD / CAD moves higher at the start of the European session on Monday, staying near the upper end of its daily range at time of writing, around the region of 1.2775-80.
The pair has managed to regain some positive traction on the first day of a new week and has recovered part of the previous day’s decline to the 1.2755-50 support area. The rebound is due exclusively to resurgence in demand for the US dollar, although the current upward movement in oil prices could benefit the Canadian dollar, currency tied to commodity prices, and limit additional gains in the USD / CAD pair.
The unimpressive NFP report on Friday, which showed that the US economy added 49,000 jobs in January, strengthened the case for more fiscal support. The likelihood of a massive US stimulus plan has increased even more so after the Senate passed a budget resolution to accelerate the coronavirus relief plan, proposed by President Joe Biden for $ 1.9 trillion, to pass without Republican support.
Meanwhile, expectations of increased government borrowing to finance the stimulus pushed the benchmark 10-year US bond yield to near one-year highs. This, in turn, has helped reignite demand for the USD. Aside from this, progress on coronavirus vaccines and hopes for a strong economy have further benefited the US dollar and offered some support for the USD / CAD pair.
Meanwhile, optimistic economic outlook has fueled hopes for a recovery in fuel demand. This, coupled with Saudi Arabia’s promise of additional supply cuts in February and March, has pushed the price of oil to its highest level in just over a year. This could prevent the pair’s bulls from opening aggressive new positions. and it has turned out to be the only factor limiting the gains of the USD / CAD pair.
There is no major economic data release on Monday from either the US or Canada. This also makes it prudent to wait for some subsequent purchases before positioning for any further bullish movement. Meanwhile, US bond yields may influence USD price dynamics and generate some trading opportunities around USD / CAD.
USD / CAD technical levels