USD/CAD bears are taking control as US dollar dips

• USD/CAD bears take charge as US dollar shaves gains.
• US dollar moves into a sideways consolidation following fresh cycle highs. 

USD/CAD is trading at 1.12699 and flat in Asia in consolidative markets. The price is sitting near 1.2700 and is in the hands of the bears following the overnight bid in the greenback.

USD set a 16-month high against the euro on Monday with the DXY surging for a fresh cycle high after the news that the Federal Reserve Chair Jerome Powell was re-nominated for a second four-year term by President Joe Biden. 

Lael Brainard, the Federal Reserve board member who was the other top candidate for the job, will be vice-chair, the White House said. The dollar index against a basket of currencies DXY rose 0.42% on the day to 96.53, the highest since July 2020. 

CAD holds in positive grounds

Meanwhile, net speculators’ CAD net positions have held positive ground for a fourth straight week following the hawkish tone of the Bank of Canada. The upcoming meeting will be critical considering we have the race between central banks on.

The BoC is ahead of the game though and a move from the Reserve Bank of New Zealand would possibly support sentiment for continued hawkishness at the BoC and support the commodity currency.  

''We expect a 25bp hike, but the market has gotten itself all tied up in knots expecting a super-hawkish tone. Yet in reality, downside risks are emerging and higher swap/mortgage rates have already done the heavy lifting. Could the Kiwi have had its best days for 2021? Maybe,'' analysts at ANZ Bank explained.