- The USD / CAD is witnessing some selling for the third day in a row on Monday.
- A combination of factors should help limit losses and justify bears’ caution.
- A sustained break below the 1.2600 level is needed to confirm a further downside breakout.
The pair USD / CAD remains on the defensive at the start of the European session on Monday, trading with minimal losses near daily lows. around the region of 1.2620.
The pair moves lower for the third day in a row Monday, though a combination of factors has helped limit any deeper losses. The decline in crude prices has weighed on the CAD, currency linked to the prices of raw materials. This, along with a modest strength of the US dollar, has offered some support to the USD / CAD pair.
The firm expectations of the market for a early tightening of monetary policies by the Fed They have acted like a tailwind for the USD, which has further benefited from softer sentiment in the markets. Investors seem convinced that the Fed would start reducing its bond purchases before the end of 2021 and raising interest rates in 2022.
Apart from this, renewed concerns about Evergrande Group’s debt problems in China have weighed on investor sentiment and boosted some monetary flows to the safe haven USD. This makes it prudent to wait for some continuation selling before opening fresh bearish positions around the USD / CAD pair.
Even from a technical perspective, the pair, so far, has managed stay comfortably above the round level of 1.2600 and the lows of last week. This should act as a turning point for intraday investors amid the absence of relevant economic releases, be it from the United States or Canada.
Meanwhile, the broader market risk sentiment will influence the USD and provide a further boost to the USD / CAD. Apart from this, the dynamics of oil prices could contribute in generating some short-term trading opportunities around the USD / CAD pair.
USD / CAD technical levels
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