- The USD / CAD gained positive traction on Monday and broke four days of the losing streak.
- A strong rebound in USD demand was seen as a key factor providing a modest increase.
- Rising crude oil prices propped up the loonie and kept any significant gains in check.
The pair USD / CAD it maintained its modest intraday gains through the middle of the European session, although it seemed to be struggling to capitalize on the move beyond 1.2400.
A strong recovery in demand for the US dollar helped the USD / CAD draw some buying on dips near the 1.2350 zone on Monday and break four consecutive days of the losing streak. The rally helped the pair move away from the more than three-month lows touched on Friday, although it lacked bullish conviction.
The prospects for an early policy tightening by the Fed caused the yield on the 10-year US government bond to soar above the 1.60% level. This, coupled with a softer risk tone, as described in generally negative business sentiment in equity markets, acted as a tailwind for the safe-haven dollar.
The support factor was, to some extent, offset by bullish crude oil prices, which continued to prop up the commodity-linked Canadian dollar and limited any significant recovery for the USD / CAD pair. Therefore, it will be prudent to wait for a strong follow-up buy before confirming that the pair has bottomed out in the near term.
Market participants are now waiting for the release of US industrial production data to get some momentum. This, along with US bond yields and broader market risk sentiment, will influence the USD. Traders will follow the leads of the BoC Business Outlook Survey report and oil price dynamics for some short-term opportunities.
Technical levels
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