- USD / CAD sees positive traction and recovers a significant portion of Friday’s losses.
- With a softer risk tone, Powell’s upbeat comments extended some support for the USD.
- A rebound in oil prices benefits the CAD and limits the rise in the pair.
The pair USD / CAD moves slightly higher at the start of the European session on Monday, staying near the upper end of its intraday trading range around the region of 1.2560.
The pair has managed to regain some positive traction on the first day of a new week and has recovered a significant part of Friday’s losses, led by Canadian monthly employment data. According to Statistics Canada, the economy added 303,100 jobs and the unemployment rate fell to 7.5% in March. The data raised expectations that the BoC could slow down the pace of its bond purchases in April and acted as a positive catalyst for the loonie.
As investors took in the upbeat macroeconomic release, a softer global tone in equity markets has benefited the safe-haven US dollar and has offered some support for the USD / CAD pair. The USD bulls have been inspired by the optimistic comments of the Fed chairman, Jerome Powell, who said that the American economy really seems to be at a tipping point. This has bolstered market expectations for a relatively faster US economic recovery from the pandemic.
Powell further added that the Fed wants inflation moderately “above 2% for some timebut you don’t want it to materially rise above 2% and go back to the bad old days of inflation. ”It is worth mentioning that the optimistic outlook for the US economy, thanks to the impressive rate of vaccination against coronavirus and US President Joe Binde’s $ 2 trillion infrastructure spending plan has been fueling speculation about a spike in US inflation.
This, in turn, has raised doubts that the Fed will keep interest rates ultra-low for a longer period. Therefore, the focus now shifts to this week’s release of the US consumer inflation figures for Tuesday.
The supporting factor, to some extent, has been offset by a rebound in crude oil prices, which has benefited the Canadian dollar, currency pegged to commodity prices, and has capped any further gains for the USD / CAD pair. Investors also seem reluctant to open aggressive positions, preferring to wait on the sidelines before Monday’s release of the BoC business outlook and report.
Therefore, it will be wise to wait for some solid continuation buying before confirming that the pair has bottomed out and positioning for any further bullish moves. From a technical perspective, the USD / CAD pair, so far, has managed to defend and comfortably hold above the key psychological level of 1.2500. This level should act as a key point for short-term investors and help determine the next directional move for the pair.
USD / CAD 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.
