Economy Forex News

USD/CAD trims intraday gains, rises modestly around 1.2600

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  • USD/CAD gained some positive traction on Tuesday, although it lacked solid follow-through.
  • Bullish oil prices continued to underpin the Canadian dollar and acted as a headwind for the pair.
  • A good recovery in USD demand extended support and limited any significant downside.

USD/CAD trimmed a significant portion of its intraday gains and was last seen trading around 1.2600, up 0.10% on the day.

USD/CAD

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The pair struggled to capitalize on its initial positive move and witnessed some selling near the 1.2630 area amid bullish crude oil prices, which tend to underpin the commodity-linked Canadian dollar.
After OPEC and its allies, collectively known as OPEC+, decided to keep a cap on crude supplies.

Oil prices remained well supported near seven-year highs.

OPEC+ was concerned that a fourth global wave of COVID-19 infections could affect the recovery in demand.

The committee ignored international calls to boost production. An improved US dollar strength offset this and limited the downside to the USD/CAD pair, at least for the moment

USD continued to gain support from market expectations

The USD continued to gain support from market expectations that the Fed would begin to roll back its massive pandemic-era stimulus.
The markets have also begun pricing in a rate hike in 2022. Beyond that, a modest rally in U.S Treasury yields could continue to act as a tailwind for the dollar.

Nevertheless, a rally in equity markets prevented traders from making aggressive bets on the dollar as a safe haven.
We recommend caution before positioning for any firm near-term direction ahead of this week’s closely watched monthly jobs reports for the U.S. (NFP) and Canada, both due on Friday.

Meanwhile, traders may follow cues from Tuesday’s release of the US ISM services PMI. In addition, US bond yields and a speech by Fed Governor Randal Quarles will affect the USD.
Apart from this, oil price dynamics would further help traders to take advantage of some short-term opportunities around the USD/CAD pair.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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