- The US dollar retreats after being rejected at 1.2390.
- The pair is flat ahead of key macro events later this week.
- The USD / CAD could extend the losses towards 1.2200 – MUFG.
The USD It opened the week in a moderately positive tone and extended its rebound from Friday’s low of 1.2335 to hit resistance again at the 1.2385 / 90 zone. The pair USD / CAD it has retreated to 1.2360 afterwards and remains practically lateralized on the day.
Sideways trading ahead of key macro data
Major currency crosses are trading within earlier ranges on Monday, with the US dollar slightly firmer against its main rivals in a rocking trading session. Investors remain reluctant to place meaningful bets ahead of the release of US GDP data and monetary policy decisions by the European Central Bank, the Bank of Japan and the Bank of Canada.
In the absence of relevant macroeconomic releases today, lingering concerns about inflation and a moderate pullback in US Treasury yields are holding back bulls on the US dollar. The yield on the 10-year bond fell to 1.63% on Monday from multi-month highs of 1.68% last week, weighing on demand for the dollar.
Against the Canadian dollar, growing expectations that the Bank of Canada will be forced to start raising rates earlier than expected are supporting the CAD, which has appreciated more than 3% in the last five weeks. Against this background, some market voices anticipate that the BoC could begin to raise the tone of its message after this week’s meeting, which could give the loon a further boost.
USD / CAD: reach down to 1.22 –MUFG
From a technical perspective, MUFG’s currency analysis team looks at the CAD supported by fundamentals, which could push the pair towards 1.2200 in the near term: “The Canadian rate market has moved sharply over the last month to price. on the two previous climbs of the BoC and a more extensive hiking cycle. Weekly QE purchases are currently running at CAD2 B, and the BoC could announce plans to formally end QE this year. To bolster the CAD’s bullish momentum, the BoC will also have to drop the forward interest rate guidance (…) The next key support area is around the 1.2200 level. “
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