- USD / CAD is moving slightly lower at the start of the European session on Tuesday, although it lacks continuation.
- A weaker tone around oil prices weighed on the CAD and offered some support to the pair.
- Positive US bond yields and nervousness around COVID-19 benefit the USD and help limit the pair’s losses.
The pair USD / CAD moves slightly lower at the start of the European session on Tuesday and remains near the lower end of its daily range, just below the 1.2800 level.
The pair has seen some selling during the early part of trading action on Tuesday and has returned a part of the modest recovery movement of the previous day from the lowest level since April 2018. Despite a modest recovery in US Treasury yields, Expectations of more fiscal stimulus in the US has kept US dollar bulls on the defensive and it has put some pressure on the USD / CAD pair.
But nevertheless, growing market concerns about the continued rise in new COVID-19 infections have offered some support to the USD as a global reserve currency. Furthermore, a weaker tone around crude oil prices has weighed down demand for the Canadian dollar, a currency pegged to commodity prices, and could further contribute to limiting deeper losses for the USD / CAD pair, at least for now.
From a technical perspective, the pair’s inability to register a significant recovery and subsequent decline suggests that the short-term downtrend could still be far from over. That said, the oversold conditions on the short-term charts warrant some caution for aggressive bears before positioning for any further downside for the USD / CAD pair.
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, coupled with oil price dynamics, could generate some short-term trading opportunities ahead of the BoC’s monetary policy decision on Wednesday.
USD / CAD technical levels
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