USD/CAD extends last week’s sharp pullback from YTD peak, weakens further below 1.3000

A combination of factors dragged USD/CAD lower for the second straight day on Monday.
Reduced bets for an aggressive Fed rate hike move, a positive risk tone weighed on the USD.
Rebounding oil prices underpinned the loonie and exerted additional pressure on the major.

Haresh Menghani FXStreet

The USD/CAD pair extended last week's sharp retracement slide from the 1.3225 region, or the highest level since November 2020 and witnessed selling for the second straight day on Monday. The downward trajectory dragged spot prices further below the 1.3000 psychological mark during the early European session and was sponsored by a combination of factors.

Diminishing odds for more aggressive Fed rate hikes, along with signs of stability in the financial markets, dragged the safe-haven US dollar away from a two-decade high. Apart from this, a goodish pickup in crude oil prices underpinned the commodity-linked loonie and prompted some follow-through selling around the USD/CAD pair on Monday.

Two of the most hawkish FOMC members - Fed Governor Christopher Waller and St. Louis Fed President Jim Bullard - said last Thursday that they were not in favour of the bigger rate hike. This, in turn, forced investors to scale back their expectations for a supersized 100 bps Fed rate hike in July, which continued acting as a headwind for the USD.

A weaker greenback and tight global supplies helped offset recession fears, which, along with fresh COVID-19 lockdowns in China, had raised concerns about the fuel demand outlook. Apart from this, the Bank of Canada's surprise 100 bps rate hike last week offered some support to the Canadian dollar and exerted downward pressure on the USD/CAD pair.

With the latest leg down, spot prices have reversed last Thursday's strong move up and moved well within the striking distance of the post-BoC swing low. The mentioned area, around the 1.2935-1.2930 region should act as a pivotal point, which if broken decisively would be seen as a fresh trigger for bearish traders and pave the way for further losses.

In the absence of any major market-moving economic releases, the broader market risk sentiment could drive the USD demand. Apart from this, traders will take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch

USD/CAD

Overview
Today last price	1.2979
Today Daily Change	-0.0054
Today Daily Change %	-0.41
Today daily open	1.3033

Trends
Daily SMA20	1.2958
Daily SMA50	1.2865
Daily SMA100	1.2765
Daily SMA200	1.27

Levels
Previous Daily High	1.3136
Previous Daily Low	1.3013
Previous Weekly High	1.3224
Previous Weekly Low	1.2936
Previous Monthly High	1.3079
Previous Monthly Low	1.2518
Daily Fibonacci 38.2%	1.306
Daily Fibonacci 61.8%	1.3089
Daily Pivot Point S1	1.2985
Daily Pivot Point S2	1.2938
Daily Pivot Point S3	1.2863
Daily Pivot Point R1	1.3108
Daily Pivot Point R2	1.3183
Daily Pivot Point R3	1.323

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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