USD/CAD bounces off two-week lows, back around mid-1.2600s
- A modest pickup in the USD demand assisted USD/CAD to bounce off the 1.2600 neighbourhood.
- Bullish oil prices continued underpinning the loonie and might keep a lid on any strong move up.
- Investors eye the US Durable Goods Orders and speeches by FOMC members for a fresh impetus.
The USD/CAD pair managed to recover over 35 pips from near two-week lows and was last seen hovering near the top end of its daily trading range, around mid-1.2600s.
The pair extended its recent retracement slide from the vicinity of the 1.2900 mark and dropped to the 1.2600 neighbourhood during the early part of the trading action on Monday. An extension of the recent bullish run in crude oil prices to the highest level since July continued underpinning the commodity-linked loonie and exerted some pressure on the USD/CAD pair. However, a modest pickup in the US dollar demand helped limit any further losses, rather assisted the pair to attract some dip-buying at lower levels.
Worries about potential risks from the debt crisis at China Evergrande Group resurfaced after a deadline for paying $83.5 million in bond interest passed without any remarks from the company. Apart from this, prospects for an early rate hike by the Fed continued acting as a tailwind for the greenback. It is worth recalling that the Fed's so-called dot plot indicated policymakers' inclination to raise interest rates in 2022. This helped offset a pullback in the US Treasury bond yields and revived the USD demand.
It, however, remains to be seen if the USD/CAD pair is able to capitalize on the move or meet with some fresh supply at higher levels. Market participants now look forward to the US economic docket, highlighting the release of Durable Goods Orders later during the early North American session. Apart from this, the US bond yields and speeches by a slew of influential FOMC members will influence the USD. Traders might further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.
Technical levels to watch