- A combination of factors sparked fresh selling around USD/CAD on Monday.
- Rising oil prices underpinned the loonie and put pressure on amid a weaker dollar.
- The prevailing risk appetite dragged the dollar, which is a safe haven, to a new monthly low.
The pair USD/CAD came under renewed selling pressure on Monday and came back close to the two-week lows reached in the previous session. The pair maintained its preferred tone during the first half of the European session and was last seen hovering around the 1.2780-1.2785 zone, down nearly 0.40% on the day.
As China prepares to ease COVID-19 restrictions after two months, tight global supply prospects acted as a tailwind for crude prices, which, in turn, underpinned the commodity-linked loonie. . Elsewhere, the risk boost weighed on the safe haven US dollar and put some downward pressure on the USD/CAD pair.
Investors were bullish on the hope that the easing of COVID-19 restrictions in China could boost the global economy. This was evident in a generally positive tone around equity markets, which steered flows away from traditional haven assets and dragged the dollar to a fresh monthly low on the first day of a new week.
That said, expectations of more drastic measures to rein in inflation, coupled with a rebound in US Treasury yields, should cap any further dollar losses. This, in turn, warrants some caution for aggressive bearish traders ahead of the release of the latest FOMC Meeting Minutes on Wednesday.
Apart from this, the important US macroeconomic data to be released during the second half of the week will influence the demand for dollars in the short term and provide a further boost to the USD/CAD pair. Meanwhile, traders will be guided by broader market risk sentiment and oil price dynamics for short-term opportunities amid lack of economic data.
Technical levels
Source: Fx Street
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