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  • A combination of factors assisted USD/CAD to gain some positive traction on Thursday.
  • The USD attracted some haven flows amid concerns about worsening US-China relations.
  • A weaker tone around crude oil prices undermined the loonie and remained supportive.

The USD/CAD pair edged higher through the early European session and refreshed daily tops, around the 1.3525-30 region in the last hour.

Having found some support ahead of the very important 200-day SMA on Wednesday, the pair managed to regain some positive traction and for now, seems to have snapped three consecutive days of losing streak. The uptick was sponsored by a combination of supporting factors, including a modest pickup in the US dollar demand and a weaker tone surrounding crude oil prices.

The greenback attracted some haven flows amid concerns about worsening US-China relations. It is worth recalling that the US suspended passenger flights of four Chinese airlines to and from the US effective from June 16. This comes after China barred American carriers from re-entering China and fueled worries about a further escalation in the US-China tensions.

On the other hand, the Canadian dollar struggled to preserve the overnight gains that came after the Bank of Canada (BoC) policy decision. The BoC scaled back some market operations. The BoC also said that the impact of the coronavirus pandemic on the global economy appears to have peaked and the Canadian economy might have avoided the worst-case projections.

Meanwhile, some follow-through pullback in crude oil prices undermined the commodity-linked currency – the loonie – and remained supportive of the bid tone surrounding the USD/CAD pair. Oil prices fell another 2% on Thursday amid renewed concerns over a global supply glut, especially after OPEC+ failed to agree on holding a meeting to discuss the extension of output cuts.

It will now be interesting to see if the pair is able to capitalize on the attempted recovery move or runs into some fresh supply at higher levels. Failure to move back above the 1.3570-80 supply zone will suggest that the near-term bearish bias is still far from being over and prompt some fresh selling, setting the stage for a fall toward the 1.3400 round-figure mark.

Later during the early North American session, the release of the Initial Weekly Jobless Claims data from the US might influence the USD price dynamics. This coupled with headlines surrounding the US-China saga will play a key role in driving the broader market risk sentiment and produce some meaningful trading opportunities around the USD-CAD pair.

Technical levels to watch