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  • USD/CAD staged a modest intraday bounce from two-week tops set earlier this Tuesday.
  • A softer tone surrounding the USD, positive oil prices kept a lid on any meaningful gains.
  • The technical set-up favours bearish traders and supports prospects for further weakness.

The USD/CAD pair built on its steady intraday bounce from two-week lows and refreshed daily tops, around the 1.3270 region during the early European session.

The pair staged a goodish bounce from the 1.3240 region, or the lowest level since September 21 and has now recovered a part of the previous day’s losses. However, a combination of factors kept a lid on any strong gains, at least for the time being.

The US dollar remained depressed amid the latest optimism over the US President Donald Trump’s return to the White House following a hospital stay due to coronavirus infection. The USD bulls seemed unimpressed by a goodish pickup in the US Treasury bond yields.

On the other hand, a positive tone around crude oil prices underpinned the commodity-linked loonie and further collaborated towards capping gains for the USD/CAD pair. This makes it prudent to wait for some strong follow-through buying before placing fresh bullish bets.

In the absence of any major market-moving economic releases, either from the US or Canada, Tuesday’s key focus will be on the Fed Chair Jerome Powell’s scheduled speech. This, coupled with the USD/oil price dynamics will be looked upon for short-term trading opportunities.

From a technical perspective, the near-term bias remains tilted firmly in favour of bearish traders. Hence, any subsequent positive move might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

Technical levels to watch

Immediate resistance is pegged just ahead of the 1.3300 mark, above which a fresh bout of short-covering has the potential to lift the USD/CAD pair further towards the 1.3355-60 horizontal resistance. On the flip side, weakness below the daily swing lows, around the 1.3240 region, might turn the pair vulnerable to slide further towards testing sub-1.3200 levels.