- A combination of factors triggered new selling around USD / CAD on Tuesday.
- US political uncertainty weighed on the dollar, despite upbeat US macroeconomic data.
- A good rally in oil prices sustained the loonie and added to the selling bias.
The pair USD / CAD it updated daily lows, around the 1.3155 region during the early days of the American session, although it quickly recovered a few pips thereafter.
The pair was unable to capitalize on the previous session’s strong positive move of around 100 pips, instead encountering new offers on Tuesday and was being affected by a combination of factors. The US dollar remained depressed due to the uncertainty of the US political environment, while a positive rally in crude oil prices sustained the currency pegged to commodities: the Canadian dollar.
The market may have already begun to value a strong victory for Democratic challenger Joe Biden in the upcoming US presidential election. However, the fact that the contest is much closer in the warring states fueled uncertainty about the actual outcome of the elections. This, in turn, was seen as one of the key factors that weighed on the USD and kept the bulls on the defensive.
The USD struggled to gain significant traction following the release of stronger-than-expected US durable goods order data. However, growing market concerns about the potential economic impact of renewed lockdown measures to curb the second wave of coronavirus infections could continue to provide some support to the dollar’s status as a global reserve currency.
Added to this, the lack of progress during the next round of US fiscal stimulus further clouded market sentiment. This was evident from some tracking weakness in the US equity markets, which tends to benefit traditional safe-haven assets, including the USD.
Investors also seemed reluctant to make aggressive directional bets, preferring to wait before the latest monetary policy update from the Bank of Canada. This makes it prudent to wait for a strong follow-up sell before positioning for any further short-term depreciation moves for the USD / CAD pair.
Credits: Forex Street
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