- USD / CAD reverses an intraday decline and is now climbing back above the 1.2500 level.
- Nervousness around COVID-19 and a modest rebound in US bond yields prop up the USD.
- The drop in crude oil prices weighs on the CAD and continues to support the rally in the pair.
The pair USD / CAD has recovered around 35 pips from daily lows and has risen again above the key psychological level of 1.2500 during the European session on Thursday. At the time of writing, the pair is virtually unchanged on the day around that level.
A combination of factors has helped the pair to quickly reverse an intraday slide to the 1.2475-70 region and move away from the lows of the post-BoC slide to the lowest level since March 18. The continuation of continued fears about another dangerous wave of coronavirus infections in some countries weighs on investor sentiment. This, along with an intraday rebound in US Treasury yields has provided a modest rise to the US dollar safe haven.
In the meantime, Crude oil prices have remained under pressure near week-long lows in the middle of the Concerns that growing COVID-19 cases in India, the world’s third-largest oil importer, and Japan will reduce fuel demand. This, in turn, has weighed on demand for the Canadian dollar, a currency tied to commodity prices, and has further contributed to the intraday rally in the USD / CAD pair. That said, the lowered odds of an earlier monetary policy tightening by the Fed could prevent USD bulls from opening aggressive positions.
On the other hand, a more aggressive outlook from the BoC could offer some support for the loonie and further assist in limiting gains for the USD / CAD pair. On Wednesday, the BoC advanced its outlook for the first interest rate hike to the second half of 2022. This makes it prudent to wait for some solid continuation buying before confirming that the pair has bottomed out in the near term.
Market participants are now awaiting the US economic calendar, which includes the release of initial weekly jobless claims. This, along with US bond yields and broader market risk sentiment, will influence the USD. Apart from this, the oil price dynamics could further contribute to generating some short-term trading opportunities around the USD / CAD pair.
USD / CAD technical levels
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