- USD / CAD gains strong positive traction for the second straight session on Wednesday.
- A good recovery in USD demand turned out to be a key factor driving the pair higher.
Intraday USD buying accelerated during the middle of the European session and pushed the pair USD / CAD to new weekly highs, around the 1.3075 region in the last hour.
A good recovery in demand for the US dollar helped the pair gain traction for a second session in a row on Wednesday and to rebound further from the 10-month lows hit earlier this week. The rally in the USD lacked an obvious fundamental catalyst and could only be attributed to the emergence of some selling around the European currencies: euro and pound.
However, the USD bulls, for now at least, appeared to have ignored growing market concerns about the potential economic consequences of the continued rise in new COVID-19 cases. That said, the imposition of a stricter restriction in several US states has rekindled hopes for substantial US fiscal stimulus measures.
Meanwhile, the latest optimism about a possible vaccine for the highly contagious coronavirus disease raised expectations for a rapid recovery in fuel demand. This was evident by the strong bullish streak in oil prices, which rose to highs of more than two months. This, in turn, could prop up the loonie and keep any further gains for the USD / CAD in cap.
Additionally, a bank holiday in both the US and Canada could prevent investors from placing aggressive bets or positioning themselves for big moves in either direction. This makes it prudent to wait for a strong follow-up sell, possibly above 1.3100, before confirming that the USD / CAD has bottomed out in the near term.
Credits: Forex Street
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