The US dollar regained some ground against the Canadian dollar in the early Asian session. It gave back most of its gains with the opening of the London session. The pair traded at 1.3060, as of 10:30 a.m. London time.
The Canadian dollar is still facing buying pressure on prospects that the Bank of Canada will hold rates steady, compared to an increasingly dovish Fed. Both central banks are going to release their monetary policy reports this Wednesday.
The latest CoT report underpins the current bullish sentiment on the Canadian dollar, which saw the third-largest position shift among all major currencies, with an increase in bullish positioning of $1.6 billion. The US dollar faced the strongest reversal in positioning, with bullish bets falling by a whopping $5.6 billion in the week ending October 25.
Canada is a major oil-producing country and rising oil prices have been beneficial for the Canadian dollar recently. The price of Brent crude surged slightly more than 6% last week.
From a technical standpoint, the recent downtrend in the US dollar vs. Canadian dollar pair looks overstretched, with the daily RSI reaching oversold territories and the MACD turning north. Still, besides the low of 1.3055 reached on Friday, we don’t see any meaningful technical support for the pair before the July lows in the lower 1.30xx levels.
To the upside, the September 10 low of 1.3134 may act as an important mid-term resistance level in case the greenback recovers some ground against the Canadian dollar. An unexpected hawkish tone of the Fed’s meeting on Wednesday may attract fresh buyers to the pair, in which case all eyes will likely be on the aforementioned September low.