USD/CAD off multi-year lows, still in the red around 1.2460 region
- USD/CAD drifted into the negative territory for the fifth consecutive session on Monday.
- Bullish oil prices underpinned the loonie and prompted some selling around the major.
- A modest pickup in the USD demand extended some support and helped the downside.
The USD/CAD pair remained depressed through the mid-European session and was last seen hovering just a few pips above the lowest level since February 2018, touched earlier this Monday.
The pair failed to capitalize on its early uptick, instead met with some fresh supply in the vicinity of the key 1.2500 psychological mark and turned negative for the fifth consecutive session. The momentum dragged the USD/CAD pair to over three-year lows and was sponsored by bullish sentiment around crude oil prices, which tend to underpin demand for the commodity-linked loonie.
Oil prices inched higher on the first day of a new trading week and remained well supported by the extension of supply cuts by major oil producers. Further supporting the commodity was the prospects for a strong recovery in the global fuel demand and reports that top oil exporter, Saudi Arabia has cut the supply of April-loading crude to at least four Asian buyers by up to 15%.
The negative factor dragged the USD/CAD pair to over three-year lows, around the 1.2440 region, though a modest pickup in the US dollar demand helped limit any further losses. Investors remain optimistic that a massive US stimulus package would lead to relatively faster US economic recovery from the pandemic, which, in turn, was seen as a key factor that continued underpinning the USD.
Meanwhile, a pullback in the US Treasury bond yields held the USD bulls from placing fresh bets and might cap the upside for the USD/CAD pair. Expectations that the Fed will act to curb any further rise in long-term borrowing cost provided some respite to the bond traders. That said, inflation fears should keep the US bond yields elevated ahead of this week's FOMC policy meeting.
Market participants now look forward to the US economic docket, featuring the only release of the Empire State Manufacturing Index later during the early North American session. This, along with the US bond yields, will influence the USD. Apart from this, oil price dynamics might further contribute to produce some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch