- A combination of support factors helped the USD / CAD reverse an initial slide to one-month lows.
- Falling oil prices undercut the Canadian dollar and remains supported amid resurgent demand for the US dollar.
The pair USD / CAD It rose more than 50 pips from the low of a month touched during the middle of the European session and jumped to the zone of 1.2665, or new daily highs in the last hour.
Having shown some resistance below the 100-day SMA, the USD / CAD pair posted a nice intraday bounce from the 1.2610 area on Monday and was supported by a combination of factors. Crude oil prices fell for the second day in a row, moving away from a nearly two-month high hit on Friday. This, in turn, undermined the commodity-linked Canadian dollar and acted as a tailwind for the pair amid a sharp rebound in demand for US dollars.
The dollar came back strong on the first day of a new week amid rising US Treasury yields, bolstered by prospects for faster policy tightening by the Fed. Indeed, money markets have fully appreciated the possibility of an eventual takeoff in March and anticipate four interest rate hikes by the end of 2022. This, in turn, continued to drive up US Treasury yields and it offered some support to the dollar.
Meanwhile, a prolonged sell-off in the US bond markets dampened investors’ appetite for perceived riskier assets, which was evidenced by the cautious climate prevailing in the equity markets. This was seen as another factor that benefited the dollar’s relative safe-haven status and provided additional boost to the USD / CAD pair. However, it remains to be seen whether the bulls can capitalize on the move amid the absence of a relevant fundamental catalyst.
Additionally, investors could also refrain from aggressive bets and wait on the sidelines ahead of this week’s major events / data risks, starting with testimony from Fed Chairman Jerome Powell on Tuesday. This will be followed by US consumer inflation figures on Wednesday and US monthly retail sales data on Friday. Apart from this, the US bond yields will influence the USD, which together with the oil price dynamics would provide a new boost to the USD / CAD pair.
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.
