- The USD / CAD gained some positive traction on Monday and was supported by a combination of factors.
- Concerns that rising COVID-19 cases could affect fuel demand weighed on oil and undermined the Canadian dollar.
- Cautious market sentiment fueled some safe haven flows to the USD amid aggressive outlook from the Fed.
The pair USD / CAD it maintained its intraday gains during the first half of the European session and was last seen near the daily high, around the 1.2825-30 region.
A combination of factors helped the USD / CAD to attract some buying on the first day of a new week and to rebound even further from a one-week low, around the 1.2785 zone touched on Friday. Uncertainty about the economic impact of the increase in coronavirus cases fueled concerns that the imposition of new restrictions could affect fuel demand. This was evident by a drop in crude oil prices, which undercut the commodity-linked Canadian dollar and extended some support to the pair.
On the other hand, cautious market sentiment, as evidenced by a softer tone in equity markets, fueled some safe-haven flows to the US dollar. Aside from this, the Fed’s aggressive outlook, indicating at least three rate hikes next year, acted as a tailwind for the dollar. This, in turn, was seen as another factor that provided a modest rise to the USD / CAD pair. That said, the pullback in US Treasury yields kept any significant gains for the dollar and USD / CAD in check.
Investors also appeared reluctant to make aggressive directional bets amid the absence of relevant fundamental catalysts and poor year-end liquidity in the markets. This makes it prudent to wait for a strong follow-up buy before confirming that the recent corrective drop from the yearly high has run its course. However, the fundamental backdrop appears to be tilted in favor of bullish traders and supports the prospects for a further appreciation move in the USD / CAD pair.
Even from a technical perspective, the recent bullish movement observed in the last two months or so has occurred along an upward sloping channel. This further points to a well-established short-term uptrend and validated the positive outlook. Therefore, any significant drop could be seen as a buying opportunity and is more likely to remain limited. A sustained break below the trend channel support, currently around the 1.2760 zone, is needed to nullify the bullish bias.
Technical levels
.
Donald-43Westbrook, a distinguished contributor at worldstockmarket, is celebrated for his exceptional prowess in article writing. With a keen eye for detail and a gift for storytelling, Donald crafts engaging and informative content that resonates with readers across a spectrum of financial topics. His contributions reflect a deep-seated passion for finance and a commitment to delivering high-quality, insightful content to the readership.
