USD / CAD consolidates in a range below the 1.2650 level

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  • USD / CAD lacks firm direction and remains trapped within a tight range on Monday.
  • The Fed’s optimistic expectations and nervousness around Covid-19 benefit the USD and offer some support to the pair.
  • The rally in crude prices benefits the CAD and limits any further gains in the pair.

The pair USD / CAD extends its sideways movement and remains trapped within a range below 1.2650 during the European session on Monday.

A combination of divergent factors They did not help the USD / CAD pair capitalize on last week’s gains to the highest level since early October and led to subdued and range-bound price action on Monday. The US dollar held firm near a 16-month high amid expectations of an early tightening of monetary policies by the Fed, which offered some support to the pair. Having said that, the rebound in crude prices supported the CAD, a currency linked to the prices of raw materials, and limited the rise of the country.

The markets have been assessing the possibility of an eventual Fed rate hike for July 2022amid lingering concerns about rising inflationary pressures. Additionally, Fed fund futures indicate a high probability of another rise for November. The speculation was further fueled by comments from Fed Governor Christopher Waller, who said that the US central bank should accelerate the pace of adjustment to give more room for maneuver to raise interest rates.

The Fed’s optimistic expectations were seen bolstered by high US Treasury yields, which, along with the new nervousness around Covid-19, benefited the safe-haven USD. The supporting factor, to a greater extent, was offset by a modest recovery in crude oil prices from a minimum of seven weeks played first thing in the morning this Monday.

Market participants are now expecting a relatively empty US economic calendar, with the release of existing home sales data at the start of the US session. This, coupled with US bond yields and broader market risk sentiment, could sway the USD and provide some boost to the USD / CAD pair. Investors will take more indications of oil price dynamics to seize some short-term opportunities around the pair.

USD / CAD technical levels

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