- A combination of factors helped the USD / CAD gain traction for the second consecutive session.
- A cautious mood benefited the dollar as a safe haven; Weaker oil prices undercut the loonie.
- Investors await the release of the US Q4 Advanced GDP report for further momentum.
The pair USD / CAD it now appears to have entered a bullish consolidation phase and was seen swinging in a range around 1.2850, or just below the multi-week highs set earlier this Thursday.
A combination of support factors helped the pair take advantage of the previous day’s bullish breakout momentum through the 1.2770-80 supply zone and gain traction for the second session in a row. The cautious mood prevailing in the equity markets extended some support to the safe haven status of the US dollar. Conversely, a softer tone around crude oil prices undermined the commodity-pegged Canadian dollar and provided additional boost to the USD / CAD pair.
Following the overnight selloff in US equity markets, investors became more risk averse amid doubts about the timing and size of a new US fiscal stimulus package. Added to this, a delay in the supply of the COVID-19 vaccine and concerns about the possible economic consequences of the coronavirus pandemic also weighed on already weaker risk sentiment.
Meanwhile, the reintroduction of strict lockdown measures further contributed to reducing investor confidence. The UK government announced on Wednesday new measures to clamp down on travel to and from the UK and indicated that the lockdown would last until March 8. Separately, China also sought to limit Lunar New Year travel to halt an increase in COVID-19 cases.
This, in turn, raised concerns about the recovery in fuel demand. This was evident from a modest pullback in crude oil prices, which extended some additional support to the USD / CAD pair. The bulls, however, took a breather and now appeared to have moved on the sidelines ahead of Thursday’s release of the advanced US fourth-quarter GDP report for further momentum.
The data, along with broader market risk sentiment and US stimulus headlines, will play a key role in influencing USD price dynamics. Aside from this, the developments surrounding the coronavirus saga could give the USD / CAD pair some momentum and allow traders to seize near-term opportunities.
Technical levels
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