- USD / CAD drew new buying on Tuesday amid modest USD strength.
- High US bond yields continued to act as a tailwind for the dollar.
- Bullish oil prices supported the loonie and limited pre-OPEC + gains.
The pair USD / CAD It reversed an intraday slide and again approached the upper end of its daily trading range, around 1.2750 during the middle of the European session.
The pair attracted some buying on dips near the 1.2725-20 zone on Tuesday and could now be looking to take advantage of the previous day’s solid bounce from the support of the 100-day SMA. The US dollar continued to gain support from high yields on US Treasuries and rose to a high in a week and a half. This, in turn, was seen as a key factor that acted as a tailwind for the USD / CAD pair.
Markets have weighed in on the possibility of an eventual Fed takeoff in May and two more rate hikes by the end of 2022. This, coupled with risk appetite, boosted the US government’s 2- and 5-year performance. at levels not seen since March 2020. In addition, the 10-year Treasury yield remained stable near the highest level since November 24 and supported the dollar.
That said, the underlying bullish tone, represented by an extension of the recent sharp rally in equity markets, prevented traders from placing aggressive bets around the safe-haven dollar. Aside from this, a rally in crude oil prices extended some support to the commodity-linked loonie and could contain any significant rally for the USD / CAD pair, at least for now.
Market participants are now looking forward to the US economic agenda, highlighting the release of manufacturing PMI data and JOLTS job vacancies to gain some momentum during the American session. Apart from this, the headlines coming out of the OPEC + meeting will influence the oil price dynamics and allow traders to seize some short-term opportunities around the USD / CAD pair.
Technical levels
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