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  • A combination of supporting factors assisted USD/CAD to gain traction on Wednesday.
  • Coronavirus jitters weighed on investors’ sentiment and benefitted the safe-haven USD.
  • Sliding oil prices undermined the loonie and remained supportive of the intraday uptick.
  • The upside seems limited amid the US political uncertainty and head of the BoC decision.

The USD/CAD pair traded with a mild positive bias on Wednesday, albeit lacked any strong follow-through, with bulls still awaiting a sustained move beyond the 1.3200 mark.

The pair gained some traction on Wednesday and built on the previous day’s late rebound of over 40 pips from the 1.3142 area. The uptick was supported by a combination of factors, though remained limited ahead of the latest monetary policy update by the Bank of Canada on Wednesday.

Investors remain concerns that renewed lockdown measures to curb the second wave of the coronavirus infections could prove detrimental for the already fragile global economic recovery. Adding to this, the lack of progress in the US stimulus talks further dampened the market mood.

This was evident from a weaker tone surrounding the equity markets, which forced investors to take refuge in traditional safe-haven assets. This, in turn, benefitted the US dollar and extended some support to the USD/CAD pair through the first half of the trading action on Wednesday.

Apart from this, a fresh leg down in crude oil prices undermined the commodity-linked currency – the loonie – and further contributed to the bid tone surrounding the USD/CAD pair. Oil prices fell over 2% amid fears that growing COVID-19 cases could lead to a supply glut and weaker fuel demand.

However, the uncertain US political situation held the USD bulls from placing any aggressive bets. Investors also seemed reluctant, rather preferred to wait on the sidelines ahead of the BoC policy decision. This might eventually keep a lid on any strong gains for the USD/CAD pair.

Given that expectations for any kind of a major policy shift are low, the key focus will be on the BoC’s updated economic projections. This, followed by the post-meeting press conference, will infuse some volatility and assist traders to grab some meaningful opportunities.

Technical levels to watch