- USD/CAD gained strong positive traction for the second consecutive session on Monday.
- COVID-19 jitters weighed on the risk sentiment and benefitted the safe-haven greenback.
- Weaker oil prices undermined the loonie and remained supportive of the strong move up.
The USD/CAD pair climbed to one-week tops during the first half of the European session, with bulls now eyeing a sustained move beyond the 1.2800 mark.
A combination of supporting factors assisted the pair to build on the previous session's strong rebound from the vicinity of multi-year lows and gained some follow-through traction on Monday. Concerns about the continuous surge in new COVID-19 cases dented investors' sentiment and benefitted the US dollar's relative safe-haven status.
Investors remain worried about the potential economic fallout from the coronavirus pandemic and imposition of fresh lockdown measures. This, in turn, dampened prospects for a recovery in the fuel demand and weighed on crude oil prices. This was seen as another factor that undermined the commodity-linked loonie and provided an additional boost to the USD/CAD pair.
That said, the risk-off mood led to some follow-through pullback in the US Treasury bond yields, which held the USD bulls from placing aggressive bets. This, along with a modest intraday bounce in oil prices, might further collaborate towards capping any runaway rally for the USD/CAD pair amid absent relevant market-moving economic releases, either from the US or Canada.
This makes it prudent to wait for some strong follow-through buying before confirming that the USD/CAD pair has bottomed out in the near-term and positioning for any further appreciating move. The market focus will now shift to the latest monetary policy update by the Bank of Canada, scheduled to announced later this week on Wednesday.
In the meantime, developments surrounding the coronavirus saga will play a key role in influencing the broader market risk sentiment and demand for the safe-haven USD price dynamics. Apart from this, oil price dynamics will also be looked upon for some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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