- A combination of factors prompted fresh selling around USD/CAD on Tuesday.
- The USD languished near multi-week lows amid the underlying bullish mood.
- Rallying oil prices underpinned the loonie and contributed to the offered tone.
The USD/CAD pair remained depressed through the early European session and was last seen hovering around the 1.2600 round-figure mark.
The pair witnessed some fresh selling on Tuesday and has now moved well within the striking distance of near three-year lows, around the 1.2580 region touched in the previous session. The underlying bullish tone in the financial markets weighed on the safe-haven US dollar. Apart from this, rallying crude oil prices underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair.
Investors' appetite for perceived riskier assets remained supported by the impressive pace of COVID-19 vaccinations and hopes for a strong global economic recovery. The reflation trade was further fueled by the progress on US President Joe Biden's proposed $1.9 trillion stimulus package. This, in turn, pushed the yield on the benchmark 10-year US bond to one-year tops, albeit failed to provide any respite to the USD bulls.
Meanwhile, oil prices added to the recent strong positive momentum and rallied around 1.5% on Tuesday, rising to the highest level since December 2019. The momentum was supported by expectations for a swift recovery in the global fuel demand and lower US supplies following a deep freeze shut down in production last week.
Despite the negative factors, the USD/CAD pair has managed to hold above the previous day's swing low as investors now seem to have moved on the sidelines ahead of the Fed Chair Jerome Powell's testimony. That said, the near-term bias remains tilted in favour of bearish traders and supports prospects for further losses.
Ahead of Powell's remarks before the Senate Banking Committee, the release of the Conference Board's US Consumer Confidence Index might influence the USD. This, along with oil price dynamics, might produce some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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