- USD / CAD posted a solid intraday rebound from levels below 1.2600 or weekly lows.
- Rising US bond yields benefited the USD and continued to support the move.
- Bullish oil prices supported the loonie and kept any significant gains in check.
The pair USD / CAD it rallied over 60 pips from weekly lows and jumped to fresh daily highs, above 1.2650 during the early North American session.
The pair showed some resistance below 1.2600 and witnessed an intraday turnaround amid resurgent demand for the US dollar. A sudden spike in US Treasury yields provided a strong boost to the dollar, which, in turn, was seen as a key factor in triggering a short hedging move around the USD / CAD pair.
A strong sell-off in US Treasuries affected global risk sentiment. This was evident by a sharp drop in equity markets, which provided an additional boost to the safe-haven dollar. USD bulls did not appear to be affected, rather they ignored the disappointing release of the February ADP report.
In fact, private sector employers added 117,000 jobs during the reported month, down from the 177,000 expected and the prior month’s revised upward reading of 195,000. The data pointed to a slow recovery in the labor market, although investors remained optimistic amid the progress of a huge US fiscal spending plan.
That said, bullish sentiment around crude oil prices, which is now up more than 1.5% on the day, sustained the Canadian dollar pegged to commodities and limited gains for the USD / CAD pair. This makes it prudent to wait for a sustained move beyond the 1.2660 region before positioning for an extension of the recent bounce from multi-year lows.
Wednesday’s US economic agenda also includes the ISM services PMI release. This, along with US bond yields and broader market risk sentiment, will influence the USD. Traders could follow the signs of oil price dynamics to seize some significant opportunities.