USD/CAD refreshes multi-year lows, bears await sustained break below 1.2100 mark
- USD/CAD dropped to the lowest level since September 2017 during the early European session.
- A modest uptick in the US bond yields benefitted the USD and extended some support to the pair.
- Hawkish BoC outlook, bullish oil prices underpinned the loonie and capped any meaningful upside.
The USD/CAD pair reversed an early European session dip to sub-1.2100 level, or fresh multi-year lows and was last seen trading with only modest losses, around the 1.2110-15 region.
The pair continued with its struggle to register any meaningful recovery and remained depressed through the first half of the trading action on Monday. The Canadian dollar remained well supported by a more hawkish Bank of Canada decision to bring forward the guidance for the first interest rate hike to the second half of 2022. Apart from this, a bullish gap opening in crude oil prices further underpinned the commodity-linked loonie and dragged the USD/CAD pair to the lowest level since September 2017.
The negative factor, to some extent, was offset by a modest uptick, which helped limit any further losses for the USD/CAD pair, at least for now. As investors looked past Friday's dismal NFP report, a goodish pickup in the US Treasury bond yields assisted the USD to stage a modest rebound from more than two-month lows. That said, expectations that the Fed will keep interest rates low for a longer period might continue to act as a headwind for the USD. This, in turn, should continue to cap the upside for the USD/CAD pair.
The fundamental backdrop remains tilted in favour of bearish traders and supports prospects for an extension of the recent well-established downward trajectory. That said, extremely oversold RSI (14) on the daily chart warrants some near-term consolidation before the next leg down. This, in turn, warrants some caution before placing fresh bearish bets amid absent relevant market-moving economic releases, either from the US or Canada.
Technical levels to watch