USD/CAD flirts with daily low amid bullish crude oil prices, downside seems cushioned By HareshMenghani USDCAD RiskAppetite Bonds Fed Currencies
Bullish oil prices underpinned the loonie and acted as a tailwind for the major.The USD/CAD pair extended its steady intraday descent and dropped to a fresh daily low, around the 1.2720 region heading into the European session.
The pair witnessed some selling on the first day of a new week and extended Friday's late pullback from the vicinity of the 1.2800 mark, or over a three-week high. Crudeprices held steady near a multi-year high amid concerns about global supply shortages and geopolitical risks. This, in turn, underpinned the commodity-linked loonie and exerted some pressure on the USD/CAD pair.
On the other hand, a positive tone around the equity markets prompted some profit-taking around the safe-haven US dollar and further contributed to the offered tone surrounding the USD/CAD pair. That said, the prospects for a faster policy tightening by the Fed, along with elevated US Treasury bond yields should help limit losses for the buck and the USD/CAD pair, at least for now.
The fundamental backdrop seems tilted in favour of bullish traders and supports prospects for the emergence of some dip-buying at lower levels. Hence, it will be prudent to wait for a strong follow-through selling before confirming that the USD/CAD pair has topped out and that the recent strong rebound from the mid-1.2400s has run its course. This, in turn, warrants some caution for aggressive bearish traders and positioning for an extension of the intraday depreciating move.
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