- USD / CAD witnessed a corrective pullback on Monday amid a rebound in crude oil prices.
- Bets on a rate hike from the Fed continued to prop up the USD and helped limit the decline.
- The fundamental backdrop supports the prospects for some buying to emerge on the dips.
The pair USD / CAD it maintained its offered tone heading into the American session and was last seen near daily lows, just below the 1.2800 round level.
Crude oil prices started the new week on a positive note amid easing fears over the Omicron variant of the coronavirus and supported the commodity-linked Canadian dollar. This, in turn, did not help the USD / CAD to capitalize on the previous day’s intraday rally of more than 100 pips to the highest level since September 20, but instead triggered new selling on Monday.
However, the decline remains muffled, at least for the time being, amid a sustained buying of US dollars, bolstered by prospects for faster policy tightening by the Fed. Markets have been weighing the possibility of an increase for May 2022. This, coupled with a strong recovery in US Treasury yields, continued to act as a tailwind for the dollar.
Fundamental context favors USD bulls and supports prospects for some buying to emerge on dips around USD / CAD. There is no major market-moving economic data that needs to be released in the US or Canada. This makes it prudent to wait for a strong follow-up sell before confirming that the recent positive move has waned.
Technical levels
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