USD/CAD bears struggle to maintain the upper hand as dollar extends bullish correction

USD/CAD bears are having a hard time taking out key levels on the way to the Feb lows as the greenback firms

Recent weakness in the US dollar had been exacerbated by a significant buildup of net short speculative positions, although real yields have firmed on the back of Friday's move which has breathed some life back into the greenback.

At the same time, there is a large repositioning taking place in the precious metals which can support the dollar at this juncture as well.

However, there are many uncertainties about the effectiveness of a new round of US fiscal stimulus or even whether it can be delivered any time soon. This in itself is a positive for the dollar, as it can collect a safe-haven demand.

Meanwhile, the loonie has firmed in the past month, riding a backdrop of upside economic surprises and stronger commodity prices.

Canada GDP grew 4.5% in May, followed by a further 5% (preliminary estimate) increase in June

The Canadian economy kept rebounding and ongoing positive news on the data side may form a base for additional gains.

Next week is not offering catalysts data-wise in Canada, so focus will stay on oil prices and the dollar as well as geopolitical developments driving risk sentiment. 

For energy markets, the supply-side is proving supportive.

In the shale patch, firms have shifted their production profiles, providing tailwinds to crude oil prices as the bullish case for output growth grows more likely.

USD/CAD levels

In the above 15-chart, the bulls are stepping in to defend territory towards the Feb lows target area. 

A subsequent breach of the upside structure opens risk all the way back to higher.