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USD / CAD looking for a firm direction, sideways above 1.3100

  • USD / CAD quickly reversed an initial decline in the American session to the 1.3280 region.
  • Weaker crude oil prices undercut the loonie and attracted some buying.
  • Political uncertainty in the United States weighed on the USD and could limit the rise.

The pair USD / CAD it updated daily lows, around the 1.3280 region during the early days of the American session, although it quickly recovered a few pips thereafter.

The pair witnessed some selling on the last trading day of the week and extended the late retracement of the previous session from near 1.3400, or month-long highs. The drop was solely sponsored by a modest pullback in the US dollar, although the prevailing bearish sentiment around oil prices undermined the commodity currency – the loonie – and helped limit deeper losses.

Despite concerns about the potential economic fallout from escalating coronavirus cases, USD bulls held back from making new bets amid uncertainty about the outcome of the US presidential election. The prevailing risk-off environment continued to lend some support to the dollar’s safe-haven status and helped limit any significant declines for the USD / CAD pair, at least for the time being.

On the other hand, the Canadian dollar experienced a slight rebound after the release of stronger-than-expected national GDP figures for August. However, this was largely offset by the continuing decline in crude oil prices. Investors remain concerned that the imposition of new restrictions to curb the second wave of COVID-19 infection could affect fuel consumption and drag crude prices to multi-month lows.

Meanwhile, the USD / CAD pair quickly rallied around 35 pips from daily lows and was last seen trading modest losses, above 1.3300. However, the pair still appears poised to end the week with strong gains, although a move beyond the 1.3400 level still appears elusive.

Credits: Forex Street

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