- USD / CAD has gained some traction on Tuesday, although it has struggled to capitalize on its positive move.
- The rally in European stocks has weighed on the safe-haven USD and limited the pair’s rally.
The pair USD / CAD has soared to highs of more than a week at the start of the European session on Tuesday, just above the 1.2780 level, although it has rapidly retreated a few pips since then. At the time of writing, the pair has returned all initial earnings and it remains virtually unchanged on the day around the 1.2750 region.
The pair has built on its recent recovery move, from levels below 1.2600 at multi-year lows, and has moved higher for the fourth day in a row on Tuesday. The upward movement of the pair has been supported by a modest pickup in US dollar demand and a softer tone around crude oil prices, which tend to weigh on demand for the Canadian dollar, a currency linked to commodity prices.
Investors follow concerned about the economic consequences of the coronavirus pandemic. Additionally, concerns about obstacles to the US $ 1.9 trillion stimulus plan and escalating tensions between the United States and China in the South China Sea have also further affected market sentiment. This, in turn, has been seen as a key factor that has benefited the safe-haven US dollar.
It is worth reporting that Republicans have raised objections to the high price of a stimulus package for COVID-19 of 1.9 trillion dollars proposed by US President Joe Biden. Added to this, Democratic Majority Leader Chuck Schumer has raised doubts about the timing and said that a comprehensive agreement it could take four to six weeks.
Meanwhile, the diminishing hopes of a quick approval of a new economic stimulus in the US comes amid the continued increase in new coronavirus cases and the imposition of strict lockdown measures. This has raised doubts about the pace of recovery in global demand for fuel and has caused some weakness in oil prices, which, in turn, weighs on the Canadian dollar.
Having said that, a good bounce in European equities has limited strong USD gains and it has helped limit losses from black gold. This has been seen as one of the key factors that has limited any uncontrolled upward movement for the USD / CAD pair and has led to a sharp retracement of around 35 pips from an intraday high of 1.2782.
Market participants now await the release of the US Conference Board Consumer Confidence Index for further momentum. However, the key focus of attention will continue to be on the news about the US stimulus and developments related to the coronavirus saga. This, along with Wednesday’s FOMC policy decision and Thursday’s preliminary US Q4 GDP report, will help determine the next directional move for the USD / CAD pair.
USD / CAD technical levels
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