- USD/CAD gained positive traction on Monday and snapped four days of the losing streak.
- A strong pickup in the USD demand was seen as a key factor that provided a modest lift.
- Bullish crude oil prices underpinned the loonie and kept a lid on any meaningful upside.
The USD/CAD pair held on to its modest intraday gains through the first half of the European session, albeit seemed struggling to capitalize on the move beyond the 1.2400 mark.
A strong pickup in the US dollar demand assisted the USD/CAD pair to attracted some dip-buying near the 1.2350 region on Monday and snap four successive days of the losing streak. The uptick assisted the major to move away from over three-month lows touched on Friday, though lacked any bullish conviction.
The prospects for an early policy tightening by the Fed pushed the yield on the benchmark 10-year US government bond shot back above the 1.60% threshold. This, along with a softer risk tone – as depicted a generally negative trading sentiment around the equity markets – acted as a tailwind for the safe-haven greenback.
The supporting factor, to some extent, was offset by bullish crude oil prices, which continued underpinning the commodity-linked loonie and capped any meaningful recovery for the USD/CAD pair. Hence, it will be prudent to wait for a strong follow-through buying before confirming that the pair has bottomed out in the near term.
Market participants now look forward to the release of US Industrial Production data for some impetus. This, along with the US bond yields and the broader market risk sentiment, will influence the USD. Traders will further take cues from the BoC's Business Outlook Survey report and oil price dynamics for some short-term opportunities.