USD/CAD refreshes session tops, eyeing a move beyond 1.2100 mark

The USD/CAD pair held on to its intraday gains through the first half of the European session, with bulls eyeing a move beyond the 1.2100 mark.

The pair managed to regain some positive traction on the last trading day of the week and reversed a part of the previous day's retracement slide from the 1.2140 region, or one-week tops. The uptick was exclusively sponsored by a modest US dollar strength and seemed unaffected by a bullish tone around crude oil prices, which tend to underpin the commodity-linked loonie.

In fact, the yield on the benchmark 10-year US government bond jumped back above the 1.60% threshold in reaction to reports that US President Joe Biden will announce a $6 trillion budget for the fiscal year 2022. This stoked worries about rising inflationary pressures, which might force the Fed to act faster and tighten its monetary policy sooner rather than later.

Meanwhile, the Biden administration’s multi-trillion spending plan provided a strong boost to the already upbeat market mood. This was evident from an extended rally in the global equity markets, which held traders to place any aggressive bets around the safe-haven greenback. Investors also seemed reluctant ahead of another read on the US inflation.

The US Bureau of Economic Analysis is scheduled to release the Fed's preferred inflation gauge – the core PCE Price Index later during the early North American session. A stronger print will validate the higher inflation narrative and fuel speculations about an earlier than anticipated Fed lift-off. This might prompt some short-covering move around the USD/CAD pair.

Technical levels to watch