USD / CAD remains under pressure below the 1.2100 level

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  • The USD / CAD is moving with a slight negative bias for the second day in a row on Friday.
  • Pessimistic expectations from the Fed and falling US bond yields continue to weigh on the USD.
  • A softer tone around oil prices weighs on the CAD and helps limit deeper losses in the pair.

The pair USD / CAD remains on the defensive below the 1.2100 level during the European session on Friday, although it lacks a strong continuation sell.

The pair has extended the modest losses of the previous day and moved lower for the second day in a row on Friday. The fall is due to prevailing selling bias around the US dollar, which has been affected by expectations that the Fed will maintain its ultra-flexible policy stance for a longer period.

Data released Thursday showed that the pace of inflation in the United States rose to a 13-year high in May. However, investors appear to be aligned with the Fed’s narrative that any inflation spike is likely to be transitory as the economy continues to recover and price pressures will ease later in the year.

This has been bolstered by the previous day’s sharp drop in US Treasury yields, which has extended through the first half of trading action on Friday. In fact, the benchmark 10-year US government bond yield remains weak near its lowest level since early March, which has acted as a headwind for the US dollar.

Having said that, the pair’s fall remains supported, at least for the moment, amid a softer tone around oil prices, which tend to weigh on demand for the Canadian dollar, a currency linked to commodity prices. The USD / CAD pair, so far, has been swinging within a range since the beginning of this week, which warrants some caution before opening new directional positions.

Market participants are now awaiting the release of the University of Michigan’s preliminary consumer sentiment index for further momentum later at the start of the American session. Other than this, US bond yields will influence the USD. Investors could follow the signs of oil price dynamics to seize some short-term opportunities.

USD / CAD technical levels

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