USD/CAD reverses an intraday dip to 1.2100 mark, turns flat

The USD/CAD pair dropped to the 1.2100 mark during the first half of the European session, albeit quickly recovered few pips thereafter. The pair was last seen hovering around the 1.2115-20 region, nearly unchanged for the day.

The pair struggled to capitalize on its early uptick, instead met with some fresh supply near the 1.2140 region and for now, seems to have snapped two consecutive days of the winning streak. The pullback was exclusively sponsored by a modest US dollar weakness, though a softer tone around crude oil prices undermined the commodity-linked loonie and helped limit any further losses.

The attempted USD recovery from the lowest level since January ran out of steam amid firming expectations that the Fed will retain its ultra-lose policy stance for a longer period. Bulls looked past the overnight comments from the Fed Vice Chair Randal Quarles, indicating that the FOMC is edging closer to begin a discussion about tapering if the economic data come in stronger than expected.

That said, a modest uptick in the US Treasury bond yields should help to put a tentative floor under the greenback. This, along with a modest pullback in crude oil prices, held traders from placing aggressive bearish bets around the USD/CAD pair. Oil prices edged lower amid concerns about a potential increase in Iranian supplies, which overshadowed optimism over fuel demand recovery.

This makes it prudent to wait for some strong follow-through selling before positioning for the resumption of the recent/well-established downward trajectory. Market participants now look forward to the US economic docket – featuring the releases of the Prelim (first revision) Q1 GDP, the usual Initial Weekly Jobless Claims, Durable Goods Orders and Pending Home Sales – for some impetus.

This, along with the US bond yields, will influence the USD later during the early North American session. Apart from this, Traders might further take cues from oil price dynamics. This, in turn, should allow traders to grab some short-term opportunities around the USD/CAD pair.

Technical levels to watch