- A combination of factors continued to weigh on the USD / CAD for the second consecutive session.
- The US dollar witnessed aggressive and protracted trade before the US presidential election.
- A strong rebound in crude oil prices sustained the loonie and compounded the downward pressure.
The pair USD / CAD it fell to week-long lows, around the 1.3140-35 region in the middle of the European session, although it recovered a few pips thereafter.
The pair added to the steep losses of the previous day and saw some subsequent selling for the second consecutive session on Tuesday. The fall was sponsored by a fairly aggressive trade in the US dollar and a strong intraday recovery in crude prices, which tend to underpin demand for the commodity-linked currency – the Canadian dollar.
Heading into Election Day in the US, markets now appear to have begun pricing a victory for Democratic nominee Joe Biden, who is expected to spend heavily on stimulus. This, in turn, prompted the USD bulls to lighten their bets and was seen as one of the key factors that continued to put heavy pressure on the USD / CAD pair.
In addition to this, the prevailing optimistic mood in the market, despite growing concerns about the economic consequences of the new coronavirus-induced locks, further affected the dollar’s relative safe-haven status. The flow of risk appetite was evident from bullish trade sentiment in equity markets and was bolstered by a rally in US Treasury yields.
Meanwhile, crude oil prices rose more than 3% on Tuesday and rebounded further from multi-month lows hit in the previous session following reports that Russian oil companies may agree to an extension of oil production cuts. OPEC +. This was also cited as another factor that benefited the loonie and contributed to the intraday decline in the USD / CAD pair.
Tuesday’s decline could further be attributed to some technical selling on a sustained break below 1.3200. However, mild oversold conditions on the hourly charts helped limit further losses ahead of the key event risk. That being said, the USD / CAD pair still looks vulnerable to falling further and pointing towards challenging the 1.3100 level.
Credits: Forex Street
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