- A combination of factors assisted USD/CAD to catch some bids on Monday.
- The USD stalled its recent downtrend and managed to gain some traction.
- A downward spiral in oil undermined the loonie and remained supportive.
The USD/CAD pair gained some follow-through traction through the mid-European session and climbed to fresh daily tops, closer to mid-1.4100s in the last hour.
The pair stalled its recent sharp pullback from multi-year tops and caught some aggressive bids on the first day of a new trading week, snapping four consecutive days of losing streak in the wake of a fresh downward spiral in crude oil prices.
Oil prices fell sharply on Monday and briefly dropped below the key $20 psychological mark, hitting its lowest level in 18-years amid concerns over a further decline in demand on the back of COVID-19-related travel restrictions.
Weaker oil prices undermined demand for the commodity-linked currency – the loonie. This coupled with a modest pickup in the US dollar demand provided an additional boost and remained supportive of the pair’s intraday positive move.
As investors looked past the Fed’s unlimited QE, the greenback found some support in the wake of the latest optimism over a massive $2.2 trillion US economic stimulus package and for now, seems to have ended its week-long bearish trend.
Adding to this, mounting fears over the economic fallout from the coronavirus pandemic continued weighing on investors’ sentiment, which further benefitted the greenback’s perceived safe-haven status against its Canadian counterpart.
It will now be interesting to see if the pair is able to capitalize on the momentum further beyond Friday’s swing highs – set in reaction to the Bank of Canada’s surprise move to lower interest rates – or meets with some fresh supply at higher levels.
Technical levels to watch