USD/CAD drops towards 1.2600 on firmer oil, risk-on mood
|- USD/CAD takes offers to refresh intraday low, prints five-day losing streak.
- Oil cheers firmer sentiment, economic recovery hopes amid demand-supply fears.
- China-Canada prisoner swap, US stimulus hopes exert additional downside pressure amid fewer Evergrande news.
- US Durable Goods Orders, sentiment-related headlines will be prone for fresh impulse.
USD/CAD stands on the slippery ground near 1.2615 as sellers attack mid-September lows during early Monday. In doing so, the loonie pair drops for the fifth consecutive day, down 0.30% intraday by the press time.
While checking the catalysts, the double whammy of the US Dollar Index (DXY) weakness and firmer prices of Canada’s biggest export item, WTI crude oil, gains major attention.
The US Dollar Index (DXY) pauses a three-week uptrend, recently easing to 93.23, down 0.05% on a day, amid risk-on mood. On the contrary, WTI refreshes a three-month high by piercing the $75.00 threshold of late.
The DXY pullback could be linked to the risk-on mood taking clues from US policymakers’ hints over the much-awaited infrastructure spending bill. US House Speaker Nancy Pelosi steps back from her initial hints of Monday voting on the bill by preferring Thursday for the House floor test. Her optimism towards passage seems to underpin the market optimism.
Furthermore, chatters over easing the virus-led activity restrictions from Japan and Australia also favor the market bulls, weighing on the US dollar’s safe-haven demand. On the same line was the weekend news that China and Canada did a prisoner swap during the weekend, resulting in the release of Meng Wanzhou, daughter of Huawei's founder and the CFO of the company, indirectly eased the tension between the US and China.
The aforementioned risk catalysts not only weigh on the US dollar but also underpin the WTI. Also favoring the black gold are the hope of the economic recovery and geopolitical tension that challenge the oil supplies.
Amid these plays, S&P 500 Futures rise for the fourth consecutive day to refresh one-week high, up 0.36% around 4,461 at the latest whereas the US 10-year Treasury yields ease from the highest since June, snapping a five-week uptrend.
Moving on, USD/CAD traders may pay higher attention to the risk catalysts for further direction while the US Durable Goods Orders for August may also help for an additional guide.
Technical analysis
Although 50-DMA challenges USD/CAD sellers around 1.2615, bulls are less likely to return until the quote stays below the 1.2700 mark surrounding multiple highs flashed from late August.
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