USD/CAD moves to upper 1.2500s with loonie hurt by Canadian Covdi-19 concerns

USD/CAD has been on the front foot for most of the session, rising from Asia Pacific session lows around 1.2520 to current levels around 1.2580. That means the pair has crossed back to the north of its 21-day moving average. Short-term USD/CAD bulls may be on the lookout for a test of April highs around the 1.2600 level, ahead of a potential move beyond that to the 50-day moving average which currently resides in the 1.2630s. Just above that is the March high at 1.2647. USD/CAD currently trades with gains of about 60 pips or 0.5% on the session.

Canada Covid-19 concerns

Concerns regarding rising Covid-19 cases in Canada and potential tougher lockdowns ahead seem to be weighing on the loonie on Tuesday. The Premier of Ontario, the most populous province in Canada with the largest economy, said on Tuesday that the state is to toughed Covid-19 restrictions soon and Canadian PM Trudeau commented that the country is facing a very serious third wave.

Canada is currently struggling to contain the spread of the B.1.1.7 variant first identified in the UK, which is up to 70% more transmissible and 30% deadlier than the original strain. Meanwhile, Western provinces are struggling to contain an outbreak of the P.1 variant first detected in Brazil. In total, Canada reported an additional 6.5K infections on Monday and the trajectory of infections suggests things are only likely to get worse in the coming weeks. Experts are warning that unless stringent measures are taken, the infection rate is likely to hit record highs (i.e. more than 10K infections per day).