- USD / CAD achieves a modest intraday recovery amid broad USD strength.
- Rising US bond yields and cautious market sentiment benefit the safe-haven USD.
- Bullish oil prices act as a tailwind for the CAD and could limit the pair’s gains.
The pair USD / CAD has reversed a slide at the start of the European session to new two-week lows and it has rallied more than 50 pips in the last hour, although it lacks continuation. At the time of writing, the pair is trading at 1.2647, up 0.14% on the day.
The pair has shown some resilience below the 1.2600 level and has witnessed an intraday short-hedging movement due to a broad strength of the US dollar, bolstered by rising US Treasury yields. In fact, the US government bond yield at 10 Benchmark years soared to the highest level since June 17 amid prospects for an early tightening of monetary policies by the Fed.
It is worth remembering that the Fed indicated last week that will soon begin to reverse its massive pandemic-era stimuli. Furthermore, the so-called dot chart showed the inclination of policy makers to raise interest rates in 2022. In addition to this, several FOMC members expressed support for the first phase of policy tightening and supported the USD.
Apart of this, a change in risk sentiment, amid lingering concerns about China’s Evergrande Group’s unresolved debt crisis, has further benefited the safe haven USD. However, an extension of the recent bullish streak in oil prices has acted as a tailwind for the CAD, a currency linked to commodity prices, and could limit the rise in the USD / CAD pair.
Market participants are now awaiting testimony from Fed Chairman Jerome Powell before the Senate Banking Committee. This, along with the release of the Conference Board Consumer Confidence Index and US bond yields, will influence the USD. Other than this, the oil price dynamics could provide some significant boost to the USD / CAD pair.
USD / CAD technical levels
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