- A combination of factors causes aggressive selling around USD / CAD on Tuesday.
- The result of the Canadian elections and the rebound in crude prices benefit the CAD.
- Risk appetite weighs on the safe-haven USD and contributes to the selling bias around the pair.
The pair USD / CAD is extending the rejection drop of the previous day from the 1.2900 level and witnessing strong continuation selling on Tuesday, breaking three consecutive days of winning streak. The pair has remained under pressure during the first half of the European session on Tuesday and remains near the lower end of its daily trading range, just above the 1.2750 level.
The ruling Liberal Party of Canada, led by the Prime Minister Justin Trudeau, has maintained power after a highly contested election Monday, although he has not achieved an absolute majority. This, along with a good rebound in crude oil prices has benefited the CAD, currency linked to the prices of raw materials. Apart from this, a modest weakness in the US dollar has put downward pressure on the USD / CAD pair.
The appetite for risk, as shown by a strong rally in equity markets, has proven to be a key factor in has weighed on the safe haven USD. That said, expectations of an imminent Fed announcement and a further rise in US Treasury yields have acted as a tailwind for the US dollar and helped limit any further losses for the pair. USD / CAD.
Investors could also refrain from opening aggressive positions and prefer to wait for a new catalyst from the outcome of a two-day FOMC meeting starting this Tuesday. The focus will be on clues to the likely timing of the Fed’s tapering plan, which will play a key role in influencing the USD and providing new directional momentum to the USD / CAD pair.
Therefore, any subsequent decline could still be seen as a buying opportunity and remain limited near the round 1.2700 level before the outcome of the central bank meeting. The aforementioned level represents a breaking point of resistance from a week-old range and should act as a crucial point for short-term investors amid a relatively empty economic calendar on Tuesday.
USD / CAD technical levels