- A fall in US bond yields keeps USD bulls on the defensive and limits the USD / CAD rally.
- A rally in crude oil prices benefits the CAD and does not do much to support the pair.
The pair USD / CAD you are spreading your consolidation price action and remain trapped within a range, just above the 1.2050 level, during the European session on Monday.
The pair has continued its struggle to record a significant recovery and has remained weak near the lowest level since May 2015, amid prevailing bearish sentiment around the US dollar. The continued decline in US Treasury yields has kept USD bulls on the defensive. Aside from this, the underlying bullish sentiment in financial markets has also acted as a headwind for the safe-haven USD.
Meanwhile, USD bulls have not gotten a respite from firm expectations that the Fed could reduce its stimulus measures emergency amid signs of mounting inflationary pressure. Market speculation has been further fueled by Encouraging PMI reports on Friday, which indicated that business activity in the private sector expanded at a record pace in May and that price pressures continued to increase dramatically.
On the other hand, some rebound in crude oil prices has benefited the loonie, a currency tied to commodity prices, which has been well supported by a more optimistic Bank of Canada. It is worth remembering that the BoC reduced its weekly asset purchases at the monetary policy meeting in April and also advanced the guidance for the first interest rate hike to the second half of 2022. This also helps to limit the gains of the USD / CAD pair.
From a technical perspective, the recent price action could still be classified as a consolidation phase. This, coupled with the inability of the USD / CAD pair to gain significant traction, suggests that the short-term downtrend could still be far from over. This, in turn, supports the prospects for a further short-term bearish move amid the absence of relevant economic releases on Monday from either the US or Canada.
USD / CAD technical levels
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