• The US dollar rebound from 1.2445 lows remains below 1.2500.
• CAD remains strong with oil prices surging.
• USD/CAD: Breach of 1.2450 might lead to 1.2300.

The US dollar is attempting to pick up on Monday after a sharp decline observed in the previous three days. The pair has bounced up from two-month lows at 1.2445 although, so far, it has remained unable to post a relevant recovery with the Canadian dollar supported by higher oil prices.

The loonie remains strong as crude prices hit fresh highs

The Canadian dollar has been unfazed by the moderate US dollar strength seen on Monday. The loonie remains supported by the steady rally on crude oil, one of Canada’s main exports. The benchmark US WTI has appreciated for the eighth consecutive day, hitting fresh 7-year highs above $82, while the barrel of brent has traded above $84 for the first time since September 2018.

With fixed income markets closed on Monday, oil prices have offset the overall positive greenback tone. The investors have assumed the fact that Friday’s lackluster employment report will not deter the Federal Reserve to start tapering its bond purchasing program over the next months, which has supported the USD against most of its peers.

In absence of any relevant macroeconomic releases on Monday, the market is focusing on the US CPI and the FOMC minutes, due next Wednesday, to better assess the next Fed move and set the near-term direction for the USD.

USD/CAD breach of 1.2450 will open the path towards 1.2300 – Scotiabank

According to the FX Analysis Team at Scotia Bank, the pair should confirm above 1.2450 level to avoid further depreciation: “From a technical perspective, the cross may struggle to detach itself from the 1.2450-1.2500 zone but a convincing decline opens up USD losses to the 1.24 mark with 1.23 following with relative ease.”

Technical levels to watch