- Sliding oil prices undermined the loonie and extended some support to USD/CAD.
- The upside remained limited amid the emergence of some fresh USD selling bias.
- Bears might wait for a sustained break below 100-DMA before placing fresh bets.
The USD/CAD pair struggled to register any meaningful recovery and remained well within the striking distance of 2-1/2-month lows set on Wednesday.
A pullback in crude oil prices undermined demand for the commodity-linked currency – the loonie – and was seen as one of the key factors behind the pair’s modest uptick during the early part of Thursday’s trading action. Oil prices slipped for the second straight session on Thursday amid a surprise build-up in the US crude stockpiles.
Adding to this, concerns about worsening US-China relations overshadowed the recent optimism over signs of gradual demand recovery for oil. The US Secretary of State Mike Pompeo revoked Hong Kong’s special status and raised prospects for a further escalation of diplomatic tensions between the world’s two largest economies.
The supporting factor, to a larger extent, was negated by some renewed US dollar selling bias, which kept a lid on any meaningful positive move for the USD/CAD pair. The positive news about a potential COVID-19 vaccine and hopes for a global economic recovery remained supportive of the upbeat market mood. This, in turn, weighed on the greenback’s relative safe-haven status.
Hence, it will be prudent to wait for some strong follow-through buying before confirming that the USD/CAD pair might have already bottomed out near 100-day SMA, around the 1.3700 mark. Conversely, a convincing breakthrough the mentioned support will set the stage for an extension of the recent downward trajectory witnessed over the past two weeks or so.
Moving ahead, market participants now look forward to a slew of important US macro data for some fresh impetus later during the early North American session. Thursday’s US economic docket highlights the release of the second estimate of Q1 GDP, Durable Goods Orders for April, Initial Weekly Jobless Claims and Pending Home Sales.
Technical levels to watch
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