- USD/CAD witnessed some long-unwinding trade on Wednesday amid a modest USD pullback.
- A goodish intraday bounce in oil prices underpinned the loonie and contributed to the slide.
- Concerns over the economic fallout from coronavirus pandemic might help limit deeper losses.
The USD/CAD pair extended its steady decline through the early European session and refreshed daily lows, around the 1.4150 region in the last hour.
The pair witnessed some long-unwinding trade on Wednesday – snapping two consecutive days of winning streak – and has now retreated over 100 pips from near three-week tops set in the previous session.
A modest recovery in the global risk sentiment, as depicted by a positive mood around the equity markets, dented the US dollar’s safe-haven demand and turned out to be one of the key factors exerting pressure.
The positive market mood was supported by the US President Donald Trump’s overnight comments that 20 states have shown readiness to re-open and the passage of $484 billion US economic stimulus package.
This coupled with an intraday bounce in crude oil prices, now up around 2.5% for the day, underpinned the commodity-linked currency – the loonie – and further contributed to the weaker tone on Wednesday.
However, persistent concerns over the economic fallout from the coronavirus pandemic might continue to support to the greenback’s status as the global reserve currency and help limit any meaningful slide.
Hence, it will be prudent to wait for some strong follow-through selling before confirming that the pair might have already topped out in the near-term and positioning for an extension of the corrective fall.
In the absence of any major market-moving economic releases, developments surrounding the coronavirus saga and the USD/oil price dynamics will play a key role in influencing the momentum and on Wednesday.
Technical levels to watch
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