Brexit led global risk-aversion has been supportive for the safe-haven demand for the US Dollar and denting demand for commodity-linked, high yielding currencies - like the Canadian Dollar, with the USD/CAD pair surging over 300-pips in a single trading session on Friday.
The pair, however, has failed to build on to its gains and decisively move above 100-day SMA resistance, around 1.3100 handle, despite of weaker crude oil prices and broadly strengthening US Dollar. The ongoing recovery for the USD/CAD pair could also be attributed to the current down-leg in crude oil prices, with the WTI crude oil now trading well below $47.00/barrel mark.
On Friday, a sudden drop in the US 10-years treasury yields, led by the unexpected outcome of the Brexit referendum, and a gush of flight to safety was seen supportive for the pair's sharp up-surge. Additional up-move, however, was restricted by a sharp slide in the Canadian 10-years treasury yields, which now seems to move in tandem with US 10-years treasury yields.
Looking at the current dynamics, most of the intrinsic are pointing towards further upside momentum for the pair in the near-term with the only factor restricting additional bullish momentum being the declining Canadian 10-year treasury yields. Hence, a slight improvement in the Canadian treasury yields would turn conditions favorable and assist the USD/CAD pair to extended its recovery trend beyond 100-day SMA resistance around 1.3100 region, towards testing May swing highs resistance around 1.3190 level.
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