- A combination of factors triggered new selling around USD / CAD on Tuesday.
- Risk appetite, falling US bond yields weighed on the safe-haven dollar.
- Rising crude oil prices propped up the loonie and contributed to the slide.
USD intraday selling bias accelerated in the last hour and dragged the pair down USD / CAD back to 1.2300 during the first half of the European session.
Having faced rejection near 1.2400, the USD / CAD ran into fresh offers on Tuesday and, for now, appears to have stalled its recent rebound from the four-month lows touched last week. The drop was sponsored by the emergence of new sales around the US dollar and a modest rebound in crude oil prices, which tend to prop up the commodity-linked Canadian dollar.
Risk appetite in the markets did not help the safe-haven dollar capitalize on the good rally the day before from month-long lows. Aside from this, a modest drop in US Treasury yields undermined the dollar. That said, expectations of an early policy tightening by the Fed should limit USD losses and provide support to the USD / CAD pair.
Fed Chairman Jerome Powell reaffirmed last Friday that the US central bank is still on track to begin reducing its bond purchases by the end of this year. Investors also appear to be convinced that the Fed would be forced to adopt a more aggressive response policy to contain stubbornly high inflation. This supports the prospects for some buying to emerge on the dips around the USD.
Market participants are now looking forward to the US economic record, which features data from the Conference Board Confidence Index, Richmond Manufacturing Index and New Home Sales. This, along with US bond yields and broader market risk sentiment, will influence the USD. Traders will follow the signs of oil price dynamics to gain some momentum around USD / CAD.
Technical levels
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