- USD / CAD continues its struggle to post a significant recovery from multi-year lows.
- Pessimistic expectations from the Fed and falling US bond yields weigh on USD bulls and limit the pair’s gains.
- Softer crude oil prices weigh on the CAD and help limit deeper losses amid coronavirus concerns.
The pair USD / CAD has retraced around 25-30 pips from intraday highs and is trading again near the lower end of its daily range, with bears now looking for weakness below the 1.2100 level.
The pair has failed to capitalize on its modest rally from the Asian session to the 1.2135 region and remains near the nearly six-year lows touched last week. A combination of factors has prevented US dollar bulls from opening aggressive positions and limited the rise in the USD / CAD pair. However, a softer tone around crude prices has weighed on the loonie, a currency tied to commodity prices, and has helped limit the deepest losses, at least for now.
The USD has been hit by disappointing US retail sales data on Friday, which have reaffirmed the pessimistic view of the Fed and forced investors to cut their expectations for a tightening of the Fed’s monetary policy ahead of schedule. This, along with the current drop in US Treasury yields., has acted as a headwind for the dollar. That said, concerns about the continued rise in new coronavirus cases in Asia could offer some support for the safe-haven US dollar.
From a technical perspective, recent price action over the past week could still be classified as a consolidation. Apart from this, the inability of the USD / CAD pair to register a significant recovery suggests that the short-term downtrend could still be far from over. This, in turn, indicates that the path of least resistance remains to the downside. Therefore, any recovery attempt could be seen as an opportunity for the bears.
There is no major economic data release on Monday from either the US or Canada, leaving the USD at the mercy of US bond yields. Investors could follow the signs of broader market risk sentiment and oil price dynamics for some near-term momentum. However, the key focus of attention will continue to be the release of the minutes from the FOMC’s monetary policy meeting on Wednesday, which could determine the next directional move for USD / CAD.
USD / CAD technical levels
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