- A combination of factors triggers new selling around USD / CAD on Tuesday.
- Pessimistic expectations from the Fed and optimism for the COVID-19 vaccine weighs on the safe-haven USD.
- Positive oil prices support the CAD and contribute to the intraday selling bias.
The pair USD / CAD moves with a negative bias at the start of the European session on Tuesday, breaking below the horizontal zone of 1.3040 and falling to the lowest levels since November 11 at 1.3010. At time of writing, the pair is recovering slightly from lows but remains with bearish pressure intact.
Following good price swings in both directions the day before, the pair encountered fresh selling on Tuesday, pressured by a combination of factors. The US dollar has had to capitalize on the positive rally of the previous day which came after the release of the optimistic US PMI figures for November. Apart of this, a positive tone around crude oil prices has benefited the Canadian dollar, a currency pegged to commodity prices, and has put some pressure on the USD / CAD pair.
The USD has been under pressure due to growing speculation that the Fed could ease monetary policy in December amid concerns about the economic consequences of the continued rise in new coronavirus cases. Also, the latest optimism about a possible early launch of COVID-19 vaccines has continued to support risk appetite sentiment prevalent. This has added to the selling bias surrounding the safe haven US dollar.
Meanwhile, additional news of successful COVID-19 vaccine trials has revived hopes of a rapid global economic recovery and a rebound in energy demand. It’s worth remembering that AstraZeneca said Monday that its COVID-19 vaccine was 70% and 90% effective in pivotal trials. This, in turn, pushed WTI crude oil prices to the highest level since March and benefited the loonie, which has further contributed to the intraday decline in the USD / CAD pair.
From a technical perspective, sustained weakness below the 1.3040 support zone it can be seen as a new trigger for the bears and may make the USD / CAD pair vulnerable to breaking below the key psychological level of 1.3000. The move lower could extend towards the monthly lows, around the 1.2930-25 region.
Market participants are now awaiting the US economic calendar, which features releases from the Conference Board Consumer Confidence Index and the Richmond Fed Manufacturing Index. The data, along with broader market risk sentiment, could influence USD price dynamics and help investors seize some near-term opportunities.
USD / CAD technical levels
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