- USD / CAD gains traction for the second day in a row on Wednesday.
- A modest rally in US bond yields and a softer risk tone benefits the USD.
- Moderate oil prices do little to influence the CAD or provide any boost.
The pair USD / CAD moves higher at the start of the European session on Wednesday, climbing above the 1.2600 level and hitting new one-week highs. At the time of writing, the pair remains in the zone of daily highs around the 1.2610 region.
The pair has built on the positive move of the previous day and gained some continuation traction for the second day in a row on Wednesday. The momentum has helped the USD / CAD pair to move away from lows of more than two weeks, around the key psychological level of 1.2500 touched on Monday and is due to a modest rally in the US dollar.
The USD has halted its recent corrective decline from the four-month highs and has found respite after a modest rebound in US Treasury yields. Aside from this, a softer tone around equity markets has offered some additional support to the safe-haven US dollar against its Canadian counterpart.
The USD has been supported by prospects for a relatively faster economic recovery from the pandemic in the United States, thanks to the impressive rate of vaccination against the coronavirus. This, along with US President Joe Biden’s infrastructure spending plan of more than $ 2 trillion, has been fueling speculation about a spike in US inflation.
This, in turn, has raised doubts that the Fed will keep interest rates ultra-low for a longer period. Attention will therefore remain on today’s release of the FOMC meeting minutes, which will be closely scrutinized for clues if the conditions to begin modifying its monetary policy were discussed. This should follow supporting the positive overall outlook for the USD.
On the other hand, a moderate action around crude oil prices has had little influence on the Canadian dollar, a currency pegged to commodity prices, and has not provided a significant boost to the USD / CAD pair. Black gold, so far, has struggled to capitalize on the prospects for stronger global economic growth, with the API report the day before showing that US crude inventories fell last week.
Looking at the technical picture, a sustained move above the round 1.2600 level will be seen as a further trigger for the bulls. The USD / CAD pair could then aim to break above the intermediate resistance at 1.2625-30 and aim to test the next big hurdle near the 1.2645-50 resistance zone.
USD / CAD technical levels
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