- USD/CAD gains traction for the second straight session, albeit lacked any strong follow-through.
- A pickup in oil prices underpinned the loonie and capped gains amid a subdued USD demand.
- Investors now look forward to US inflation figures, Fedspeaks for some trading opportunities.
The USD/CAD pair surrendered a major part of its early gains to three-day tops, albeit has still managed to hold comfortably above the key 1.40 psychological mark.
The pair built on the previous day’s strong intraday recovery move from the 1.3900 mark and gained some follow-through traction during the Asian session on Tuesday. However, a combination of factors – including a subdued US dollar demand and a goodish pickup in oil prices – kept a lid on any further gains for the major.
The latest optimism over the easing of lockdown restrictions was overshadowed by concerns about the second wave of coronavirus infections. This wave evident from a weaker tone around the global equity markets, which boosted demand for traditional safe-haven assets and led to a fresh leg down in the US Treasury bond yields.
Against the backdrop of speculations that the Fed might be forced to push interest rates below zero, sliding US bond yields undermined the USD demand. This, in turn, failed to assist the greenback to capitalize on its recent positive move to two-week tops and led to a subdued/range-bound trading action on Tuesday.
Meanwhile, oil prices remained well supported by an unexpected commitment from Saudi Arabia to deepen production cuts in June. In fact, WTI futures were up over 2% for the day, which provided a modest lift to the commodity-linked currency – the loonie – and contributed to the pair’s intraday pullback from the 1.4065 level.
Despite the downtick, the pair has managed to hold near 100/200-hour SMA confluence region. Hence, it will be prudent to wait for some follow-through selling before traders start positioning for any further near-term depreciating move for the USD/CAD pair.
Moving ahead, market participants now look forward to the release of the US consumer inflation figures. This along with scheduled speeches by FOMC members might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North-American session.
Technical levels to watch
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