- USD / CAD gains some positive traction on Monday and is supported by a combination of factors.
- The USD is witnessing some continuation shorts hedging and rallies further from multi-week lows.
- The drop in oil prices weighs on the CAD and continues to support the positive intraday movement of the pair.
The pair USD / CAD moves higher during the European session on Monday, trading above the round level of 1.2300 and reaching new daily highs around 1.2310.
A combination of factors has helped the pair gain some positive traction on the first day of a new week and move away from the three-year lows around the 1.2265 region touched on Friday. The US dollar has built on last week’s positive rally from the lowest level since February 26. Apart of this, a weaker tone around crude oil prices has weighed on the loonie, a currency linked to commodity prices, and has offered some support to the USD / CAD pair.
As investors watched Beyond the pessimistic message from the Fed last week, the USD has witnessed a short-hedging move and has been supported by the mostly upbeat US macroeconomic releases on Friday. The US Bureau of Economic Analysis reported on Friday that the price index of Annual core PCE accelerated to 1.8% in March from the previous 1.4%. Additional details revealed that personal income increased 21.1%, while personal expenses increased 4.2% in March.
In the meantime, Concerns of a second wave of COVID-19 infections in India overshadow optimism about a strong rebound in demand in developed countries. This, in turn, has acted as a headwind for the loonie and provided additional boost to the USD / CAD pair. That said, the divergence in monetary policies adopted by the Bank of Canada and the Federal Reserve could keep strong gains in the pair at bay.
It is worth remembering that the BoC reduced its weekly asset purchases at the April monetary policy meeting and advanced the guidance for the first interest rate hike to the second half of 2022. On the contrary, the Fed remains firm in maintaining the current accommodative monetary policy. This makes it prudent to wait for some solid continuation buying before confirming that the USD / CAD pair could have bottomed out in the near term.
Market participants are now awaiting the US economic calendar, highlighting the ISM manufacturing PMI release at the start of today’s US session. This will be followed by a speech by Fed Chairman Jerome Powell, who will play a key role in influencing USD price action. Apart from this, oil price dynamics and broader market risk sentiment should allow investors to seize some short-term opportunities around USD / CAD.
USD / CAD technical levels
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