• A combination of factors assisted USD/CAD to stage a goodish bounce from monthly lows.
  • Upbeat US macro data extended some support to the USD despite declining US bond yields.
  • Coronavirus jitters weighed on the Canadian dollar and remained supportive of the bounce.

The USD/CAD pair stalled this week's rejection slide from the 1.2625-30 supply zone and staged a goodish rebound from monthly lows touched on Thursday. The US dollar remained depressed through the first half of the trading action and tumbled to four-week lows in the wake of the continuous decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond fell sharply to a one-month low amid expectations that the Fed will keep interest rates near zero levels for a longer period. This, in turn, was seen as a key factor that dragged the pair further below the key 1.2500 psychological mark, to the lowest level since March 22.

The USD, however, found some support following the release of mostly upbeat US macro data, which assisted the pair to find decent support near the 1.2475 region. The Commerce Department reported that Retail Sales rose 9.8% MoM in March as against consensus estimates pointing to a 5.9% growth. This marked the best figure since May 2020. Adding to this, the closely watched Retail Sales Control Group, which has a larger impact on US GDP, surpassed expectations and increased 6.9% during the reported month. Separately, regional manufacturing indices and Weekly Jobless Claims also came in better than market expectations, indicating that the recovery is well on track.

On the other hand, the Canadian dollar was weighed down by a devastating third wave of COVID-19 infections driven by more transmissible and dangerous variants. This was seen as another factor that contributed to the pair's recovery of over 80 pips. That said, the underlying bullish sentiment in the financial markets held bulls from placing any aggressive bets around the safe-haven USD and kept a lid on any further gains for the major, rather led to a subdued/range-bound price action through the Asian session on Friday. The pair now seems to have stabilized just below mid-1.2500s and remains at the mercy of developments surrounding the coronavirus saga.

Short-term technical outlook

From a technical perspective, the overnight slide below the 1.2500 mark confirmed a bearish break through a four-week-old trading range. That said, the lack of any strong follow-through selling and the subsequent recovery warrants some caution before positioning for any further depreciating move.

Meanwhile, the 1.2560-65 region now seems to have emerged as immediate resistance. A sustained move beyond might trigger some short-covering move and push the pair back towards the 1.2600 mark. This is followed by a strong barrier near the 1.2625-30 region, which coincides with the top boundary of a four-month-old descending trend channel and should act as a key pivotal point for short-term traders.

On the flip side, weakness back below the 1.2500 mark might find some support near the overnight swing lows, around the 1.2475 region. Some follow-through selling will reaffirm the bearish breakdown and turn the pair vulnerable to accelerate the fall towards the 1.2400 mark. The downward trajectory could further get extended towards multi-year lows, around the 1.2365 area touched on March 18.

fxsoriginal

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD extends rally to fresh highs above 1.2180

Dollar’s sell-off accelerates, despite of a generalized dismal mood. Government bond yields surge, stocks plunge as inflation concerns mount. Upbeat German data provide further support to the shared currency.

EUR/USD News

GBP/USD resumes advance, challenges highs in the 1.4150 area

GBP/USD recovered the ground lost and trades near its weekly high, despite a souring market’s mood. UK PM Johnson's announcement of additional easing of restrictions boosted the pound on Monday. BOE Governor Andrew Bailey is set to speak later on.

GBP/USD News

XAU/USD turns south before testing 200-day SMA, tests $1,820

XAU/USD came under strong bearish pressure in early American session. Next critical support for gold aligns at $1,800. Rising US Treasury bond yields and risk aversion weigh on gold.

Gold News

BTC crashes, markets follow suit

The cryptocurrency market experienced a crash as the flagship cryptocurrency tumbled. Although some altcoins are recovering, Bitcoin price is still scrambling to find a support level and might trigger another sell-off soon.

Read more

S&P 500 Nasdaq Day Ahead: Can the Fed stop the red

Equity markets are in the red again on Tuesday as the Fed looks on powerless for now. Inevitable really, things cannot keep going up forever but it is always easy with hindsight. 

Read more

Majors

Cryptocurrencies

Signatures