- A combination of supporting factors assisted USD/CAD to gain positive traction on Wednesday.
- An extension of the positive move in the US bond yields extended some support to the USD.
- A softer tone around oil prices undermined the loonie and remained supportive of the uptick.
The USD/CAD pair held on to its modest gains above the 1.2600 mark through the early European session, albeit lacked any follow-through buying.
The pair found some support near the very important 200-day SMA and gained positive traction during the first half of the trading action on Wednesday, snapping three consecutive days of the losing streak. The USD/CAD pair, for now, seems to have stalled its recent sharp pullback from YTD tops and was supported by a combination of factors.
The US dollar moved away from one-week lows touched in the previous day amid some follow-through uptick in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond inched back closer to the 1.30% threshold amid expectations that the Fed might still begin rolling back its pandemic-era stimulus in 2021.
On the other hand, a softer tone around crude oil prices undermined the commodity-linked loonie and extended some additional support to the USD/CAD pair. That said, concerns about the fast-spreading Delta variant eased after China said that it had stopped the community spread of COVID-19. This, in turn, acted as a tailwind for the commodity.
Investors also seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell's speech at the Jackson Hole Symposium. This was seen as another factor that kept a lid on any runaway rally for the USD/CAD pair, warranting some caution before positioning for any further appreciating move.
Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders later during the early North American session. This, along with the US bond yields, might influence the USD. Traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.