- USD / CAD witnessed a short coverage rebound on Wednesday amid oversold conditions.
- A modest decline in crude oil prices undercut the loonie and it remained supported.
- Sustained USD selling could limit the upside ahead of US and Fed retail sales.
The pair USD / CAD it rose throughout the middle of the European session and updated the daily highs around the 1.2755 region in the last hour.
Having shown some resistance below the 1.2700 mark, the pair managed to gain some positive traction on Wednesday and has now rebounded from the previous day’s slide to the lowest level since April 2018. The rally lacked an obvious fundamental catalyst. and could be classified as short. covering the rebound from short-term oversold conditions.
Meanwhile, a modest pullback in crude oil prices, from the highest level since early March, undermined the commodity currency, the Canadian dollar, and extended some support to the USD / CAD pair. That said, the prevailing bearish sentiment surrounding the US dollar could contain any strong rally for the pair, at least for now.
As US lawmakers moved toward a new COVID-19 relief package, the key USD index fell to fresh two-and-a-half-year lows amid market optimism. Global risk sentiment was well supported by recent optimism about the launch of vaccines for the highly contagious coronavirus disease and hopes for a Brexit deal.
Added to this, expectations that the Fed will increase its bond buying program put additional downward pressure on the dollar during most of Wednesday’s trading action. Therefore, investors will be on the lookout for the much anticipated FOMC monetary policy update, which will be announced later during the US session.
Meanwhile, the release of the US monthly retail sales figures will be seen as a respite for USD bulls and will yield some short-term trading opportunities. However, market reaction is likely to remain limited as investors could refrain from aggressive bets in the face of key event risk.
Technical levels
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