USD/CAD bounces off multi-year lows, lacks follow-through and remains below 1.2600

USD/CAD staged a modest rebound from 34-month lows touched earlier this Wednesday.
A sharp spike in the US bond yields revived the USD demand and remained supportive.
Bullish crude oil prices underpinned the loonie and kept a lid on any meaningful upside.

Haresh Menghani FXStreet

The USD/CAD pair refreshed daily tops during the early North American session, with bulls now looking to build on the momentum further beyond the 1.2600 round-figure mark.

The pair quickly reversed an intraday dip to mid-1.2500s, or the lowest level since April 2018, and rallied around 50 pips in the last hour amid a sudden pickup in the US dollar demand. The yield on the benchmark 10-year US government bond rallied beyond 1.40% for the first time since February 2020, which was seen as a key factor that provided a strong lift to the greenback.

Reflation trade remains the primary theme in capital markets amid the progress on US President Joe Biden's proposed $1.9 trillion stimulus package. This comes amid the impressive pace of COVID-19 vaccinations, which has been fueling hopes for a strong global economic recovery. This, along with rising inflation expectations, continued pushing the bond yields higher.

Meanwhile, the optimistic global economic outlook supported prospects for a strong recovery in fuel demand and pushed crude oil prices beyond the $63.00 mark, or 14-month tops. This, in turn, underpinned the commodity-linked loonie and turned out to be the only factor that held bulls from placing aggressive bets, rather capped the upside for the USD/CAD pair.

There isn't any major market-moving economic data due for release from Canada and the US economic docket features the only release of New Home Sales. This makes it prudent to wait for some strong follow-through buying before confirming that the USD/CAD pair might have bottomed out in the near-term and positioning for any meaningful recovery move.

In the meantime, market participants will look forward to Fed Chair Jerome Powell's second day of testimony before the House Financial Services Committee. Powell's remarks are expected to be identical to those delivered before the Senate Banking Committee on Tuesday, though might influence the USD price dynamics and provide some impetus to the USD/CAD pair.

Technical levels to watch

USD/CAD

Overview
Today last price	1.2588
Today Daily Change	0.0000
Today Daily Change %	0.00
Today daily open	1.2588

Trends
Daily SMA20	1.2725
Daily SMA50	1.2739
Daily SMA100	1.2898
Daily SMA200	1.3156

Levels
Previous Daily High	1.2648
Previous Daily Low	1.2579
Previous Weekly High	1.2746
Previous Weekly Low	1.2594
Previous Monthly High	1.2881
Previous Monthly Low	1.259
Daily Fibonacci 38.2%	1.2605
Daily Fibonacci 61.8%	1.2621
Daily Pivot Point S1	1.2562
Daily Pivot Point S2	1.2536
Daily Pivot Point S3	1.2494
Daily Pivot Point R1	1.263
Daily Pivot Point R2	1.2673
Daily Pivot Point R3	1.2699

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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