- USD / CAD remains trapped within a tight range during the European session.
- A softer tone around crude oil prices weighs on the CAD and offers some support for the pair.
- Hopes for more US stimulus keep USD bulls on the defensive and limit the pair’s rally.
The pair USD / CAD lacks a firm directional bias and ranges between lukewarm gains and minor losses, around the region of 1.2750, during the European session on Tuesday.
The pair has continued its struggle to post a significant recovery from multi-year lows and has been swinging within a tight range for the last three trading days. The continued rise in COVID-19 infections has overshadowed recent optimism over the launch of coronavirus vaccines and has benefited the safe-haven US dollar.
Apart of this, a softer tone around crude oil prices has weighed on the loonie, currency linked to the prices of raw materials. This has been seen as another factor that has offered some support to the USD / CAD pair and has helped limit the decline. Having said that, Expectations of increased US fiscal stimulus have prevented USD bulls from opening aggressive positions and they have not provided any boost to the pair.
Given the recent drop to the lowest level since April 2018, moderate and limited price action within a range could still be classified as a consolidation phase. This, in turn, suggests that the short-term downtrend could still be far from over. Therefore, any recovery attempt could be seen as a selling opportunity and runs the risk of quickly disappearing.
Market participants are now awaiting the US economic calendar, which features the Empire State Manufacturing Index’s second-tier releases and industrial production data. This, coupled with the news of the US stimulus, could influence USD price dynamics and generate some short-term trading opportunities. However, the key focus of attention will remain the latest monetary policy update from the FOMC.
The Fed is scheduled to announce its decision at the end of a two-day meeting on Wednesday. Market expectations are growing that the Fed will further ease its monetary policy by expanding the bond purchase program. The announcement could play a dominant role in boosting sentiment around the USD and provide a new directional boost to the USD / CAD pair.
USD / CAD technical levels
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