USD/CAD bulls looking to build on the recovery beyond 1.3400 mark

• A combination of supporting factors assisted USD/CAD to stage a goodish recovery on Thursday.
• A sharp turnaround in the global equity markets extended some support to the safe-haven USD.
• Weaker crude oil prices undermined the loonie and remained supportive of the intraday move up.

The USD/CAD pair refreshed daily tops during the early European session, with bulls now looking to build on the momentum further beyond the 1.3400 round-figure mark.

The pair managed to find decent support near the 1.3330 region and witnessed a sharp intraday short-covering move on Thursday. The strong positive move was sponsored by a modest pickup in the US dollar demand and a weaker tone surrounding crude oil prices.

As investors looked past dovish Fed, the USD staged a minor recovery from more than two year tops. A turnaround in the global risk sentiment – as depicted by a sharp fall in the equity markets – extended some support the greenback’s relative safe-haven status.

Adding to this, a pullback in crude oil prices undermined the commodity-linked loonie and provided an additional boost to the USD/CAD pair. Oil prices dropped over 1% on Thursday amid concerns that second wave of COVID-19 infections could hinder fuel demand recovery.

Meanwhile, the latest leg of a sudden spike over the past hour or so could further be attributed to some technical buying above the 1.3375-80 supply zone. Hence, it remains to be seen if the uptick is backed by any genuine buying or turns out to be a stop-run.

The impasse over the next round of the US fiscal stimulus measures might hold the USD bulls from placing aggressive bets and cap the USD/CAD pair. It is worth reporting that Republicans and Democrats have struggled to reach a deal before the expiry of some earlier measures later this week.

Market participants now look forward to the US economic docket, highlighting the release of Advance Q2 GDP report. The data will play a key role in influencing the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.

Technical levels to watch