- USD / CAD experiences a modest rebound from lows of more than a month amid a rebound in demand for the USD.
- The optimistic decision of the Bank of Canada last week and a rebound in oil prices benefit the CAD and limit the pair’s gains.
- Lowering expectations of a Fed rate hike could help limit any strong positive movement in the pair.
The pair USD / CAD moves slightly higher during the first half of the European session on Tuesday, staying close to daily highs around the region 1.2415-20.
After show some resistance below the 1.2400 level, the pair gained positive traction on Tuesday and has recovered part of the previous day’s drop to the lowest level since March 18. The US dollar has found some support in a modest rally in US Treasury yields and has moved away from the multi-week lows hit the previous day. This, in turn, has been seen as a key factor that has provided a modest rise to the USD / CAD pair.
Having said that, a combination of factors could prevent investors from opening bullish positions aggressive and limit strong USD / CAD gains, at least for now. Investors seem to be convinced that the Fed will keep interest rates low for a longer period. Added to this, the underlying bullish tone in stock markets, amid the prospects of a strong global economic recovery from the pandemic, could put limiting the rise of the safe-haven US dollar.
On the other hand, The loonie could continue to benefit from last week’s upbeat BoC decision to reduce your weekly asset purchases. The Canadian central bank also advanced the guidance for the first interest rate hike for the second half of 2022. Apart from this, a spike in crude oil prices has further benefited the loonie, currency pegged to commodity prices, and could limit additional USD / CAD gains.
This makes it prudent to wait for some solid continuation buying before confirming that the USD / CAD has bottomed out and positioned for any further bullish movement. Market participants are now awaiting the US economic calendar, which features the Conference Board’s Consumer Confidence Index release for fresh momentum. Investors will also be guided by oil price dynamics to seize some short-term opportunities around the USD / CAD pair.
USD / CAD technical levels
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