USD/CAD bears taking on the 1.35 level, eyes on 200-DMA

• The loonie is catching a bid to below the 1.35 level, eyes on the 200-DMA.
• Oil, particularly, is supporting a bid in the loonie as economies come back online from COVID-19 lockdowns. 

USD/CAD is currently trading at 1.3488 having travelled to the downside from a high of 1.3572 to a low of 1.3480 following an upbeat Bank of Canada.

Markets are positive again mid-week despite a pause for thought ahead of the North American open with futures seeing moderate losses and a firmer US dollar. However, we have seen a fresh low printed in the greenback which has sunk to  97.19to mid-March levels.

Investors continue to cheer the signs that the tables are slowly starting to turn withing new cases interruptions or subsequent secondary lockdowns, so far. Markets are also confident that central banks and governments are there to underpin the global economy. The sentiment has helped to prop up the commodity markets as well and the CRB index is now back into the 134 handle. Oil, particularly, is supporting a bid in the loonie.

"We're witnessing a Great Rebalancing in real-time, as demand for energy continues to normalize,'"analysts at TD S securities explained. a combination of travel as social distancing relaxes in developed nations and large-scale OPEC+ cuts are helping to accelerate the market rebalancing. 

WTI is currently trading at $36.79 and has completed a 78.6% Fibonacci of the 20 April lows, a positive for the Canadian economy. The production and delivery of oil products, natural gas and electricity in Canada contribute about 10% Canada's $1.8 trillion gross domestic product (GDP).

Bank of Canada relatively upbeat 

The Bank of Canada was relatively upbeat when leaving rates unchanged at 0.25% and reaffirming the ELB. The Bank noted that the COVID impact has peaked, flagged the role of decisive and targeted fiscal actions, and revised its near-term estimates to show a less severe contraction by Q2. Tapering is now on the agenda as well of its short-term funding programs. 

Crucially, the last paragraph of the statement was tweaked. "There is now a shift towards supporting the inflation target, rather than bridging the containment period, consistent with its assertion that the peak impact is behind us and market functioning has improved," analysts at TD Securities explained.

USD/USD levels 

The loonie is testing below the psychological 1.35 level and the 1.3460/200 day moving average support area will be closely watched. We have seen a low of 1.3480 so far. 

"We are biased to think this will hold as a lot of good news appears to be in the CAD price. But until there is a clear shift in focus to fundamentals, the CAD may be a reluctant participant in this narrative," analysts at TD Securities explained.