USD/CAD spikes above mid-1.2800s, highest since Dec. 20

Haresh Menghani FXStreet

• Weaker oil prices weigh on commodity-linked Loonie.
• USD consolidates recent gains and remains supportive.
• Sliding US bond yields now seemed to cap gains.

The USD/CAD pair finally broke out of its Asian/early European session consolidation phase and refreshed session tops in the last hour.

The pair's latest leg of up-move over the past hour or so, to the highest level since December 20, lacked any fundamental trigger and was led by some renewed weakness in crude oil prices. In fact, WTI crude oil extended overnight slide and is currently placed at near two-week lows, which was eventually seen weighing on the commodity-linked currency - Loonie and driving the pair higher.

Further gains, however, remained capped amid subdued US Dollar price-action, primarily on the back of weaker US Treasury bond yields. Despite firming expectations that the Fed could opt for a faster monetary policy tightening cycle, sliding US bond yields failed to assist the greenback to build on its recent upsurge and was eventually seen keeping a lid on the pair's bullish momentum.

Focus now shifts to important US macroeconomic releases, with the key focus on ISM manufacturing PMI, which along with the Fed Chair Jerome Powell's second appearance before the Congress would be looked upon for some fresh bullish impetus.

Technical levels to watch

A follow-through buying interest could the pair towards the 1.2900 handle, above which the bullish momentum is likely to get extended beyond 1.2915-20 supply zone towards reclaiming the key 1.30 psychological mark.

On the flip side, any meaningful retracement below the 1.2830-25 region is likely to find support near the 1.2800 handle, which if broken might prompt some additional long-unwinding trade and drag the pair further towards the 1.2755 support level.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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