- A combination of factors propelled some selling around USD / CAD on Monday.
- The pullback in US bond yields and risk appetite sentiment weighs on the safe-haven USD.
- Bullish oil prices benefit the CAD and add to the intraday selling bias around the pair.
The pair USD / CAD has lost some ground at the start of the European session on Monday, falling to daily lows around the 1.2675 region. At the time of writing, the pair is recovering slightly and seeks to stabilize around the 1.2700 region.
The pair has struggled to capitalize on last week’s solid rebound from multi-year lows and once again has started to retreat from the 1.2745-50 resistance zone. The decline is due to a softer tone around the US dollar and a new boost in crude oil prices, which tends to prop up the Canadian dollar, a currency pegged to commodity prices.
Yields on US Treasuries have receded further from the one-year highs hit last week, which, in turn, has been seen as a key factor in has kept USD bulls on the defensive. Aside from this, a strong rally in the stock markets has further affected the safe haven USD and put some downward pressure on the USD / CAD pair.
On the other hand, the loonie has benefited from rising crude oil prices, which rose more than 1.5% in reaction to the approval of a huge US fiscal spending plan in the House of Representations. US President Joe Biden’s $ 1.9 trillion pandemic aid package will now move to the US Senate for further deliberation.
Meanwhile, reflation trading has fueled expectations of a pickup in inflation and has been fueling doubts that the Fed will maintain ultra-low rates for a longer period. This, in turn, has offered some support to US bond yields and helped limit any significant declines for the USD, justifying some caution for bears.
This makes it prudent to wait for a strong continuation of selling before confirming that the recent bounce has lost steam and has been positioned for the resumption of the previous downtrend. Monday’s release of the US ISM Manufacturing PMI could influence the USD and generate some trading opportunities around the USD / CAD pair.
USD / CAD technical levels
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