USD / CAD Recovers Near 1.2800 Level After Dropping To New Multi-Year Lows

  • USD / CAD reverses a slide during the European session to new multi-year lows.
  • Weaker oil prices weigh on the CAD and help limit the initial drop.
  • The USD benefits from safe-haven monetary flows and offers some additional support.

The pair USD / CAD it has quickly recovered around 30 pips from Tuesday’s European session low at 1.2767, the lowest level since May 2018, and now has approached the 1.2800 region again.

Crude oil prices have extended the previous day’s losses and have been under pressure during the first half of Tuesday’s trading action amid growing concerns about a sharp increase in new coronavirus cases. This, in turn, has weighed on the demand for the Canadian dollar, a currency linked to the prices of raw materials, which has offered some support to the USD / CAD pair.

Meanwhile, nervousness around COVID-19 has overshadowed recent optimism about the launch of a vaccine and additional measures of fiscal stimulus in the U.S. This has been evident by a weaker tone in stock markets, which has driven some safe-haven money flows to the US dollar and it has helped the USD / CAD pair to find some support near the 1.2770-65 region.

Despite the supporting factors, the bulls have lacked conviction and the USD / CAD has remained well below the previous day’s highs. This warrants some caution for the bulls. and makes it prudent to wait for some subsequent purchases before positioning itself for a significant recovery ahead of the BoC’s policy decision on Wednesday.

There is no major economic data release on Tuesday, neither from the United States nor from Canada. Therefore, broader market risk sentiment will play a key role in influencing the USD as a safe haven. This, together with the dynamics of the oil price, could generate some short-term trading opportunities during the American session.

USD / CAD technical levels

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