USD/CAD finds support at 1.2315 and returns to 1.2350 area
- The dollar bounces up from multi-month lows at 1.2310.
- The pause on US bond yield's rally has weighed on the greenback.
- USD/CAD might reach 1.22 by year-end – Scotiabank.
The US dollar is trimming losses against its Canadian counterpart after having bottomed at 3, ½-month lows at 1.2310 earlier on Wednesday. The pair has returned to 1.2350, yet still about 0.25% down on the day.
The USD dips again as US yields’ rally stalls
The greenback has given away the mild recovery posted on Monday, weighed by a pause on US T-Bond yields’ rally and a higher appetite for risk. US yields have stalled near multi-year highs on Tuesday, after having surged over the last two weeks, with the investors positioning for an imminent announcement of QE tapering by the Federal Reserve.
Additionally, the better than expected earnings reports by Johnson & Johnson and Travellers have improved the market mood. These figures follow a string of bright results in the financial sector last week, to boost appetite for risk, weighing on demand for the safe-haven USD.
On a broader picture, the commodity-sensitive Canadian dollar remains buoyed by the solid rally on crude prices. The US benchmark WTI oil is trading at multi-year highs, beyond $83, which has pushed the CAD nearly 4% higher against the greenback over the last four weeks.
Macroeconomic data has not been of any help to the USD either, US building activity contracted unexpectedly in September, revealing that shortages in raw materials and labor are starting to squeeze the sector, and triggering concerns about its potential impact on the economic growth. Housing starts declined 1.6% in September, and August’s reading has been revised down to a 1.2% growth from the 3.9% previously estimated.
USD/CAD: Seen at 1.2200 ahead of the year-end – Scotiabank
From a technical perspective, the FX Analysis Team at Scotiabank observe further downside potential in the pair: “If the USD manages to steady around 1.2365/70 into this week, a modest correction could develop. We expect USD gains to remain limited to the low/mid 1.24s, however, with daily and weekly trend momentum signals aligned bearishly for the USD (…) We think USD/CAD can print a 1.22 handle ahead of year-end.”
Technical levels to watch
Author
Guillermo Alcala
FXStreet
Graduated in Communication Sciences at the Universidad del Pais Vasco and Universiteit van Amsterdam, Guillermo has been working as financial news editor and copywriter in diverse Forex-related firms, like FXStreet and Kantox.
