- USD / CAD extends the previous day’s bounce and gains traction for the second day in a row.
- A softer tone around oil prices weighs on the CAD and supports the pair’s upward move.
- A moderate demand for the USD prevents investors from opening new positions and limits the pair’s further gains.
The pair USD / CAD moves with a slight positive bias at the start of the European session on Tuesday, with the bulls now looking to extend momentum beyond the round 1.3200 level.
The pair has built on the previous day’s good bounce of over 40 pips, from the 1.3150 region, and has moved higher for the second day in a row on Tuesday. The rebound is due to a weaker tone around crude oil prices, which tend to weigh on the demand for the Canadian dollar, a currency linked to commodity prices.
Oil prices fall for the fourth day in a row amid concerns about a further decline in demand due to renewed lockdown measures to contain the increase in coronavirus cases and the potential for increased supply. Investors will be on the lookout for crude inventory data from the American Petroleum Institute on Tuesday.
In the meantime, the rally lacked strong bullish conviction due to subdued demand for the US dollar. USD bulls have refrained from opening aggressive positions, preferring to wait on the sidelines amid fading optimism about additional US fiscal stimulus measures.
The investors remain unconvinced legislation will pass for a coronavirus aid package by the end of Tuesday’s deadline Self-imposed by the Speaker of the US House of Representatives, Nancy Pelosi. On the political front, incumbent President Donald Trump and Democratic candidate Joe Biden will face off in a debate Thursday night.
Market participants are now awaiting the US economic calendar, which includes the release of building permits and housing starts. The data, along with broader market risk sentiment, developments around the US fiscal stimulus and the coronavirus saga, could influence USD price dynamics and generate some trading opportunities around the USD pair. / CAD.
Credits: Forex Street
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