USD/CAD Bullish Bias Continues – Brace for a Buy Trade! - Forex News by FX Leaders

USD/CAD Bullish Bias Continues – Brace for a Buy Trade!

Posted Tuesday, January 26, 2021 by
Arslan Butt • 2 min read
The USD/CAD pair closed at 1.27434, after placing a high of 1.27789, and a low of 1.26871. The USD/CAD currency pair continued its bullish movement for the 3rd consecutive session on Monday, rising above the 1.27700 level, on the back of the strength of the broad-based US dollar, despite the risk-off market sentiment and the rising crude oil prices on the day.
The greenback gathered strength against its rivals after a sharp decline in the EUR/USD pair, which was triggered by the disappointing German Ifo Business Climate figures on Monday. The US Dollar Index climbed above 90.30 with the initial marker reaction, making the US dollar stronger on board, and ultimately pushing the USD/CAD pair higher.Another reason behind the rising US dollar prices was the speculation that the $ 1.9 trillion stimulus package proposed by Joe Biden will face rejection by the Democrats and the Republicans in the Senate, as they are not in favor of more spending just one month after the massive spending of $ 900 billion.

The expectations that the massive US stimulus package will be delayed, due to differences of opinion, strengthened the US dollar, further boosting the rising USD/CAD prices on Monday. Meanwhile, traders of the USD/CAD pair ignored the rising West Texas Intermediate crude oil prices on Monday. The crude oil prices rose by 1.5% on the day and supported the commodity-linked currency, the Loonie, ultimately capping any further upside in the USD/CAD pair.

However, on Monday, Canada marked the anniversary of the first case of the coronavirus that was identified in the country one year ago. After a year of living with the pandemic, Canada was dealing with the increasing spread of new and more contagious variants. Canada reported 6 new cases of the UK variant of the coronavirus and 3 cases of the South African variant on Monday, which was up from 4 and 1 respectively.

The rising number of cases of new variants of the coronavirus in Canada raised fears of a nationwide lockdown, in an effort to curb the spread of these variants, which, in turn, intensified the threat against economic recovery, which ultimately weighed on the Canadian Dollar and added to the gains in the USD/CAD pair on Monday.
On the US front, the number of coronavirus deaths and cases per day in the US has dropped markedly over the past couple of weeks, but the levels are still alarmingly high. The government’s top infectious disease expert, Dr. Anthony Fauci, said that the improvement in numbers around the country appears to be the result of natural peaking, followed by a plateau, after the holiday surge, rather than an effect of the rollout of vaccines that began in mid-December. The decreased number of cases and deaths in the US added to the strength of the US dollar, supporting the upward momentum in the USD/CAD pair on Monday.

Daily Technical Levels:
Support               Resistance
1.2715                  1.2738
1.2703                 1.2749
1.2693                 1.2761
Pivot Point:       1.2726

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About the author

Arslan Butt // Index & Commodity Analyst
Arslan Butt is our Lead Commodities and Indices Analyst. Arslan is a professional market analyst and day trader. He holds an MBA in Behavioral Finance and is working towards his Ph.D. Before joining FX Leaders Arslan served as a senior analyst in a major brokerage firm. Arslan is also an experienced instructor and public speaker.
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1 month ago

So, despite all, within hrs, it went south…..