- A combination of factors allows the USD / CAD to gain some positive traction on Tuesday.
- Concerns about rising inflationary pressure and a softer risk tone benefit the USD.
- Falling crude oil prices weigh on the CAD and provide a modest boost to the pair.
The pair USD / CAD moves with a slight positive bias during the European session on Tuesday, although it has lacked solid continuation buying and has remained capped below the 1.2100 level.
Following yesterday’s modest pullback of around 25 pips, the pair managed to gain some positive traction on Tuesday and was supported by a combination of factors. That being said, the USD / CAD pair, so far, has struggled to post a significant recovery and has held near multi-year lows, around the key psychological level of 1.2000 touched last week.
Friday’s weaker NFP release has dampened market expectations that the Fed could start reducing its asset purchases sooner rather than later. That said, investors remain concerned about mounting inflationary pressure. Apart of this, a softer tone in equity markets has further boosted some safe-haven money flows to the US dollar and it has acted as a tailwind for the USD / CAD pair, at least for now.
On the other hand, some decline in crude oil prices has weighed on the loonie, currency linked to the prices of raw materials. Oil prices have seen profit taking from the highest level since October 2018 amid prospects for increased Iranian exports. Therefore, the focus will be on a new set of talks between Iran and world powers on a nuclear deal that will begin Thursday in Vienna.
Meanwhile, investors are likely to refrain from opening aggressive positions and prefer to wait on the sidelines before this week’s key event. The Bank of Canada is scheduled to announce its latest monetary policy decision on Wednesday.. This, coupled with the latest US consumer inflation figures from Thursday, will provide a further directional boost to the USD / CAD pair.
Meanwhile, overall market risk sentiment and US bond yields will continue to play a key role in USD price action. Investors could follow the signs of oil price dynamics to seize some short-term opportunities amid a relatively empty economic calendar on Tuesday, with the release of trade balance data from the US and Canada more. late at the start of the American session.
USD / CAD technical levels
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