USD/CAD recovers from multi-week lows, climbs back closer to mid-1.2500s
- A combination of factors assisted USD/CAD to gain some positive traction on Monday.
- Oil retreated further from one-month tops touched last week and undermined the loonie.
- A goodish pickup in the USD demand provided an additional lift and remained supportive.
The USD/CAD pair traded with a mild positive bias through the early European session and was last seen hovering around the 1.2535 region, albeit lacked follow-through buying.
Having shown resilience below the key 1.2500 psychological mark on Friday, the USD/CAD pair gained some positive traction on the first day of a new week and was supported by a combination of factors. Retreating crude oil prices undermined the commodity-linked loonie. This, along with, a goodish pickup in the US dollar demand, extended some support to the USD/CAD pair.
Oil prices extended last week's retracement slide from one-month tops and dropped around 1.25% on Monday after the world's top exporter Saudi Arabia slashed crude contract prices for Asia over the weekend. This comes amid worries about the fast-spreading Delta variant of the coronavirus and raised market concerns about the outlook for the global fuel demand.
On the other hand, the USD found some support from Friday's sharp intraday spike in the US Treasury bond yields. Despite disappointing headline NFP print, additional details of the latest US monthly jobs report kept alive hopes for an imminent Fed taper announcement. Investors now expect the Fed to signal tapering in September, beginning in December and end the QE by mid-2022.
The uptick, however, lacked strong bullish conviction and warrants some caution before positioning for any further appreciating move. Both the US and Canadian markets are closed in observance of Labor Day on Monday. This further makes it prudent to wait for some follow-through buying before confirming that the recent pullback from YTD tops has run its course.
Technical levels to watch