USD / CAD near daily highs around 1.2060, bullish oil prices limit gains

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  • USD / CAD gains some positive traction Thursday amid widespread USD strength.
  • A modest rally in US bond yields and cautious sentiment in markets offer some support for the USD.
  • Bullish oil prices could continue to prop up the CAD and limit the pair’s rise.

The intraday buying of the USD has accelerated at the start of the European session on Thursday, pushing the USD / CAD pair to daily highs around the 1.2065-70 region, where it is currently maintained.

A combination of supporting factors provided a good boost to the US dollar on Thursday. This, in turn, has been seen as a key factor that has helped the USD / CAD pair regain positive traction and reverse the modest losses of the previous day.

Investors have been nervous about whether surprisingly stronger US economic data could force the Fed to start cutting its bond buying program sooner rather than later. This, in turn, has triggered a short hedging move around the USD.

The US dollar has also been seen supported by a modest rally in US Treasury yields. Apart of this, a softer risk tone in equity markets has further benefited the safe-haven USD and has offered some support to the USD / CAD pair.

The bulls now seek take advantage of this week’s bounce from the psychological level of 1.2000, the lowest level since May 2015. That said, rising crude oil prices could act as a headwind for the USD / CAD pair and limit the pair’s rise.

In fact, WTI crude oil has risen to the highest level since October 2018 amid expectations of increased demand for fuel in the US, Europe and China. This has supported the loonie and could prevent investors from opening aggressive bullish positions around the USD / CAD pair.

Market participants are now awaiting Thursday’s US economic calendar, which features the ADP report releases on private sector employment, initial weekly jobless claims and ISM’s services PMI. This, along with US bond yields, will influence USD price action.

Apart from this, broader market risk sentiment and oil price dynamics could contribute to generating some short-term trading opportunities around USD / CAD.

USD / CAD technical levels


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