USD/CAD hangs near two-week lows, up little around 1.3000 mark

• USD/CAD witnessed some short-covering on Wednesday, albeit lacked any follow-through.
• The USD bulls remained on the defensive amid the latest optimism over COVID-19 vaccine.
• Bullish oil prices underpinned the loonie and further collaborated towards capping gains.

The USD/CAD pair touched an intraday high level of 1.3028 in the last hour, albeit lacked any follow-through and quickly retreated few pips thereafter. The pair was last seen hovering around the 1.3000 mark, up around 0.13% for the day.

The pair managed to regain some positive traction during the Asian session on Wednesday and recovered a part of the previous day’s sharp fall to two-week lows. The uptick lacked any obvious fundamental catalyst and could be solely attributed to some short-covering, though a combination of factors capped the upside for the USD/CAD pair.

The US dollar was being weighed down by the prevalent upbeat market mood, which remained supported by the latest optimism over a potential early rollout of vaccine for the highly contagious coronavirus disease. Adding to this, clarity on the US political front further boosted investors’ confidence and undermined the safe-haven USD.

Meanwhile, progress toward remedies for COVID-19 revived hopes for a swift recovery in the global fuel demand. This, in turn, pushed WTI crude oil prices above the $45 mark for the first time since March, which benefitted the commodity-linked currency – the loonie – and further collaborated to keep a lid on the USD/CAD pair’s attempted recovery.

Market participants now look forward to a flurry of top-tier US macro data for some short-term trading opportunities. Wednesday’s US economic docket highlights the releases of the preliminary (second estimate) GDP report, Durable Goods Orders, Initial Weekly Jobless Claims and final Michigan Consumer Sentiment Index for November.

The key focus, however, will be on the latest FOMC meeting minutes, which will be scrutinized for the possibility of any further policy easing by the Fed in December. The Fed’s policy outlook will play a key role in influencing the near-term USD price dynamics and assist investors to determine the next leg of a directional move for the USD/CAD pair.

Technical levels to watch