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  • USD/CAD extended its sideways consolidative price action through the mid-European session.
  • The upbeat market mood weighed on the safe-haven USD and capped the upside for the pair.
  • A softer tone surrounding oil prices undermined the loonie and helped limit any deeper losses.

The USD/CAD pair was seen consolidating the overnight slide to fresh multi-year lows and remained confined in a range, just above the 1.2600 mark.

A combination of diverging forces failed to provide any meaningful impetus to the major and led to a subdued/range-bound price action through the major part of the European session on Thursday. The US dollar remained depressed amid the prevalent risk-on environment and capped the upside for the USD/CAD pair.

The global risk sentiment remained well supported by the likelihood of more aggressive US fiscal spending in 2021 under Joe Biden’s presidency. This comes amid the optimism over the COVID-19 vaccine rollouts, which fueled expectations for a strong economic recovery and continued boosting investors’ confidence.

Meanwhile, the downside remains cushioned, at least for the time being, amid a softer tone surrounding crude oil prices, which tend to undermine demand for the commodity-linked loonie. Oil prices were weighed down by a surprise build in US inventories, which resurfaced worries about the global fuel demand recovery.

Apart from this, oversold conditions on hourly charts further held the bearish traders from placing aggressive bets and help limit deeper losses for the USD/CAD pair. This makes it prudent to wait for some follow-through selling below the 1.2600 mark before positioning for any further near-term depreciating move.

Market participants now look forward to the US economic docket – featuring Philly Fed Manufacturing Index, the usual Initial Weekly Jobless Claims and housing market data. This, along with the release of Canadian ADP employment report, might produce some short-term trading opportunities around the USD/CAD pair.

Technical levels to watch