- A combination of factors does not help the USD / CAD to retain its intraday gains at the 1.2730 area.
- The rebound in oil prices supports the CAD and puts some pressure amid a modest decline in the dollar.
- The drop is likely to remain supported amid COVID-19 concerns, justifying caution for bears.
The pair USD / CAD has fallen around 55-60 pips from the highs of the European session and has fallen to new daily lows, around the region of 1.2670 in the last hour.
The pair has struggled to capitalize on its modest intraday gains and has found new sales near the region of 1.2730, pressed by a combination of factors. A sudden spike in crude prices has benefited the CAD, currency linked to the prices of raw materials. This, coupled with a modest pullback in the US dollar from three-and-a-half month highs has put some pressure on the USD / CAD pair.
As investors have digested an unexpected surge in US crude supplies, a positive risk tone has provided a good boost to black gold. US crude supply data released by the American Petroleum Institute on Tuesday showed an increase of 806,000 barrels for the week ended July 16.
Meanwhile, a Continuing strong positive movement in global stock markets has triggered some profit taking around the US dollar and has contributed to the decline in the USD / CAD pair. That said, concerns about the economic impact of the fast-spreading delta variant of the coronavirus could limit oil prices and lend some support to the safe-haven USD. This should help limit the decline in the USD / CAD pair.
The fundamental backdrop favors the bulls and supports the outlook for some lower buying to emerge amid the absence of relevant economic releases. This makes it prudent to wait for a strong continuation sell before confirming that the USD / CAD has set a high and positioning for any significant corrective declines.