- USD / CAD drew some buying on dips near the 1.2780 region amid a rebound in USD demand.
- A fresh boost in US bond yields helped reignite USD demand and remains supported.
- The rebound in oil prices could prop up the loonie and keep any wild rally in the pair at bay.
The pair USD / CAD it rallied around 50 pips from the daily lows and was last seen trading at modest losses around the 1.2825-30 region.
Signs of progress toward additional US stimulus measures triggered a new boost in US Treasury yields This, in turn, helped reignite demand for the US dollar and helped the pair to find decent support near the 1.2780 region. It’s worth reporting that Democrats introduced a $ 1.9 trillion budget measure on Monday in a step toward bypassing Republicans and the eventual approval of President Joe Biden’s COVID-19 aid package.
Meanwhile, renewed optimism about a massive economic stimulus from the United States raised hopes for a strong global economic recovery. Apart from this, the positive news related to the development of COVID-19 vaccines further boosted expectations for a recovery in fuel demand. This was evident by a strong intraday rally in crude oil prices, which sustained the Canadian dollar pegged to commodities and held off any significant rally for the USD / CAD pair.
In fact, Reuters reported on Tuesday, citing peer-reviewed trial data, that the Sputnik V coronavirus vaccine developed in Russia showed a 91.6% effectiveness rate in the phase 3 trial. The news helped. to offset a pessimistic OPEC report. The organization on Tuesday lowered its forecast for oil demand growth for 2021 to 5.6 million barrels per day (bpd) from 5.9 million bpd estimated in the January report.
Now it will be interesting to see if the USD / CAD can capitalize on the move or continue its struggle to take advantage of momentum beyond the mid-1.2800. In the absence of major market-moving economic releases, be it from the US or Canada, the oil / USD price dynamics will be considered to gain some trade momentum.