- A combination of support factors helped the USD / CAD gain strong traction on Monday.
- The new nervousness of COVID-19 shook global financial markets and gave a boost to the dollar as a safe haven.
- A sharp drop in crude oil prices undermined the loonie and continued to support the move.
The pair USD / CAD It quickly retraced around 75 pips from the two-and-a-half week highs, although it has still managed to hold on to decent daily gains, around the 1.2880 region.
The pair built on the positive movement of the previous session and gained strong positive traction on the first day of a new trading week amid resurgent demand for the US dollar. The discovery of a new variant of the highly contagious coronavirus shook global financial markets and forced investors to take refuge in the traditional safe haven dollar.
Renewed nervousness over the coronavirus fueled concerns about a slower recovery in fuel demand and led to a sharp drop in crude oil prices. This, in turn, undermined demand for the commodity-linked Canadian dollar and provided additional boost to the USD / CAD pair. However, a modest rebound in oil prices kept any further gains for the pair limited.
Meanwhile, the anti-risk flow caused a sharp drop in US Treasury yields. Aside from this, the news that an agreement had finally been reached on a long-awaited US stimulus bill further contributed to limiting the USD / CAD rally, at least for the time being. With that said, the technical setup still appears to be tilted in favor of the bulls.
The USD / CAD pair on Monday confirmed a short-term bullish break through the recent consolidated trading range held for the last week or so. This, in turn, suggests that the pair has formed a solid base around 1.2700 and supports prospects for a further recovery from the multi-year lows touched last week.
There is no important economic data that moves the market that is published on Monday, neither from the United States nor from Canada. Thus, developments surrounding the coronavirus saga will continue to play a dominant role in driving sentiment around the safe-haven dollar. This, along with the dynamics of the oil price, will also be considered for some business opportunities.
Technical levels
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