USD/CAD jumps to two-day tops, inching back closer to mid-1.3100s

• A combination of factors assisted USD/JPY to regain traction for the second straight session.
• A sharp fall in the global equity markets extended some support to the safe-haven greenback.
• A fresh leg down in oil prices undermined the loonie and remained supportive of the move up.

A sudden pickup in the USD demand pushed the USD/CAD pair back above the 1.3200 round-figure mark during the early European session.

Worries about the second wave of coronavirus infections, along with speculations of fresh lockdown measures to control the outbreak took its toll on the global risk sentiment. The anti-risk flow was evident from a slump in the equity markets, which drove some haven flows towards the US dollar.

The USD/CAD pair reversed an early dip to the 1.3170 region and has now moved into the positive territory for the second consecutive session. The momentum was further supported by a steep fall in crude oil prices, which tend to undermine demand for the commodity-linked currency – the loonie.

In fact, WTI crude oil fell around 2.50% on Monday and moved back closer to the $40.00/barrel mark on the potential return of output from Libya. Adding to this, concerns about the global fuel demand – amid the ever-increasing COVID-19 cases – further weighed on the already weaker black gold.

It will now be interesting to see if the USD/CAD pair is able to capitalize on the move or once again meets with some fresh supply near the 1.3150-60 region. In the absence of any major market-moving economic releases, Monday’s key focus will be on a scheduled speech by the Fed Chair Jerome Powell.

Technical levels to watch