USD / CAD extends recovery from multi-week lows and climbs back above 1.2700 level

  • USD / CAD extends the strong gains of the previous day and is up for the second day in a row.
  • The USD remains supported by a rally in US bond yields.
  • Bullish crude oil prices could prop up the CAD and limit any significant rise in the pair.

The pair USD / CAD moves higher at the start of the European session on Wednesday, extending the recovery of the previous day and trading near three-day highs, around the 1.2715 region.

The pair has gained traction for the second day in a row on Wednesday and has built on the previous day’s solid bounce from near the 1.2600 region, at a minimum of four months. The rebound has been seen backed by some buying around the US dollar, which has been supported by the recent rally in US Treasury yields.

The market has been valuing prospects for approval of the $ 1.9 trillion stimulus package proposed by US President Joe Biden. The reflation trade has driven the benchmark 10-year US government bond yield to the highest level since February 2020, around 1.30%, which has sustained the demand for the USD and has offered some support to the USD / CAD pair.

The supporting factor, to some extent, has been offset by a spike in crude oil prices, which tends to benefit the Canadian dollar, a currency linked to commodity prices. In fact, black gold remains stable above the $ 60.00 level, a short distance from the highs of more than a year amid optimism about the global economic outlook and expectations of a strong recovery in fuel demand.

Progress in Coronavirus Vaccination and Slowing Rate of Infections they have continued to fuel hopes for a rapid global economic recovery from the pandemic. This, coupled with expectations of a massive US fiscal spending plan, has further boosted investor sentiment. This, in turn, could limit any further gains for the USD / CAD pair.

Market participants are now awaiting the US economic calendar, which highlights the release of monthly retail sales data. Apart from this, the US bond yields will influence the USD price dynamics and could generate some significant trading opportunities around the USD / CAD pair.

USD / CAD technical levels

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