USD / CAD looks to take advantage of momentum above 1.2100 level

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  • USD / CAD regains positive traction on Monday and is supported by a combination of factors.
  • The USD finds some support thanks to a modest rally in US bond yields and softer risk sentiment.
  • The drop in crude oil prices weighs on the CAD and continues to support the pair’s intraday rally.

The pair USD / CAD moves higher during the European session on Monday, with the bulls now looking to take advantage of the momentum above the 1.2100 level.

A combination of factors has helped the pair regain positive traction on the first day of a new trading week and recover a significant portion of the post-NFP retracement drop Friday from week highs. As investors looked beyond the weakest monthly US employment report, the US dollar has found some support in a modest rally in US Treasury yields. Apart from this, a softer tone around crude oil prices has weighed on the Canadian dollar, a currency pegged to commodity prices, and acted as a tailwind for the USD / CAD pair.

A little disappointment in the NFP report toned down expectations that the Fed will start cutting its asset purchase program sooner rather than later. That said, investors remain concerned about rising inflationary pressure and refrained from opening aggressive bearish positions around the USD. Therefore, the focus will remain on the release of the latest US CPI consumer inflation figures.. Wednesday, which will be another important macroeconomic data that will set the tone for the FOMC meeting on June 15-16.

On the other hand, the loonie has been hit by a modest decline in crude oil prices. This is in addition to disappointing Canadian employment details on Friday, which offered some additional support to the USD / CAD pair. However, it remains to be seen whether the bulls can capitalize on the move or continue their struggle to break above the 1.2135-40 region amid the absence of relevant economic releases on Monday from either the US or Canada.

USD / CAD technical levels

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