- A combination of factors drove some sales for the second consecutive session.
- The intraday slide found decent support before the 1.3000 psychological level.
- Bullish oil prices undercut the loonie and could contain any strong bullish movement.
The pair USD / CAD found decent support before the key psychological level of 1.3000 and has now recovered around 50 pips from the two-week lows.
The pair witnessed strong selling during the first half of trading action on Tuesday and broke the horizontal support at 1.3040. The intraday decline was sponsored by the renewed sale of US dollars at the beginning of the European session and the rising prices of crude oil, which tend to underpin demand for the currency linked to commodities.
The dollar remained depressed amid mounting speculation that the Fed will ease monetary policy further in December amid concerns about the economic fallout from escalating coronavirus cases. On top of this, optimism about a possible COVID-19 vaccine further affected the dollar’s relative safe-haven status.
On the other hand, the loonie benefited from the ongoing uptrend in crude oil prices. Prospects for an early launch of the vaccine against the highly contagious disease coronavirus rekindled hopes for a rapid recovery in fuel demand. This, in turn, pushed WTI crude prices to three-month highs, around the $ 43.50-55 region.
Meanwhile, a modest rally in US Treasury yields helped limit any further losses for the dollar and helped the USD / CAD pair attract some buying on dips near the 1.3000 level. That said, the recovery attempt lacked a strong follow-through and therefore deserves some caution before positioning itself for any further appreciation moves.
Tuesday’s US economic agenda features the Conference Board’s Consumer Confidence Index and Richmond Manufacturing Index releases. The data may influence the USD, which, along with oil price dynamics, will be considered for some short-term trading opportunities.
Technical levels
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