- A combination of factors puts some pressure on the USD / CAD for the second day in a row.
- The recent bullish streak in oil prices continues to prop up the CAD and limit the pair’s gains.
- A pullback in US bond yields weighs on the USD and helps limit the pair’s gains.
- Investors are expecting a series of US macro data to get some directional momentum ahead of the FOMC.
The USD / CAD pair remains on the defensive during the European session on Tuesday, remaining virtually unchanged on the day around the 1.2135-40 region.
The pair has moved lower for the second day in a row on Tuesday and has retraced further from the month-long highs, around the 1.2175-80 region touched last week. The recent strong bullish streak in crude prices has continued to benefit the CAD, a currency linked to commodity prices. This, coupled with a subdued demand for the US dollar, has put some pressure on the USD / CAD pair.
The continuous improvement of the coronavirus situation in the United States and much of Europe has been fueling optimism for a strong recovery in fuel demand. This, in turn, has pushed crude prices to the highest level since October 2018. That said, the prospect of additional supply coming to market soon from Iran has limited any further gains.
On the other hand, the US dollar has come under pressure from a further decline in US Treasury yields. However, expectations of a slightly less pessimistic Fed – amid concerns about rising US Treasury yields. inflationary pressure – should help put possible support under the USD. This should limit any significant declines for the USD / CAD pair, at least for now.
Investors may also be reluctant to open aggressive positions ahead of the expected monetary policy decision from the FOMC on Wednesday. This makes it prudent to wait for some continuation selling before confirming that the recent bounce from near the key psychological level of 1.2000, at multi-year lows, has already been exhausted.
Investors are now waiting for the US economic calendar, which includes the release of retail sales, the PPI producer price index, the Empire State manufacturing index, and industrial production data. This, along with US bond yields, could influence the dollar. Apart from this, the dynamics of the oil price could generate some opportunities around the USD / CAD pair.
USD / CAD technical levels
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