- USD / CAD finds fresh selling on Tuesday amid renewed USD weakness.
- Nervousness over COVID-19 is weighing on oil prices, which could affect the loonie and help limit losses from apr.
- The focus on Tuesday will be on the second round of the US elections in Georgia and the US ISM Manufacturing PMI.
The pair USD / CAD moves with a negative bias at the start of the European session on Tuesday, staying under pressure in the zone of daily lows around the 1.2750 region.
The pair has been unable to capitalize on the previous day’s solid bounce, around 135 pips from multi-year lows, and has seen some new selling during the first half of trading action on Tuesday. The fall marks the fifth day of negative movement in the previous six and it is due exclusively to the appearance of some new sales around the US dollar.
The hopes for a strong global economic recovery in 2021 continue to support underlying bullish sentiment in financial markets. This, coupled with the likelihood of greater fiscal stimulus in the US and expectations that the Fed would keep rates lower for a longer period, has continued to affect the safe haven USD and it has put some downward pressure on the USD / CAD pair.
Having said that, uncertainty about the second round of the US elections in Georgia seemed to have dampened enthusiasm. Voting for the elections in Georgia begins later this Tuesday and the result of two seats in the Senate will determine control of the chamber. The election will also have a major impact on the ability of the incoming president of the United States, Joe Biden, to follow his preferred economic policies.
Meanwhile, Concerns about the continued rise in new COVID-19 cases and the imposition of new lockdowns in the UK have reduced prospects for a recovery in fuel demand. In addition, the stalemate in talks about possible changes in February production has weighed on oil prices. This, in turn, could affect the Canadian dollar, a currency linked to commodity prices, and help limit the decline of the USD / CAD pair.
This makes it prudent to wait for some continuation selling before investors begin to position themselves for the resumption of the recent USD / CAD downtrend. Tuesday’s release of the US ISM Manufacturing PMI and events related to the coronavirus saga could influence USD price dynamics and generate some short-term trading opportunities around the USD / CAD pair.
USD / CAD technical levels