- USD/CAD witnessed some aggressive intraday short-covering move on Tuesday.
- The prevalent cautious mood helped revive demand for the safe-haven greenback.
- A sustained move beyond 200-DMA will increase prospects for additional gains.
The intraday USD buying picked up pace during the early European session and lifted the USD/CAD pair to fresh daily tops, around mid-1.3400s in the last hour.
As investors digested the latest optimism over a sharp V-shaped global economic recovery, the US dollar was back in demand amid a modest pullback across the global equity markets. A stronger greenback was seen as one of the key factors behind the USD/CAD pair’s solid intraday bounce.
The pair has now rallied around 100 pips from the vicinity of mid-1.3300s, or three-month lows set on Monday. The strong intraday momentum was further supported by some follow-through pullback in crude oil prices, which tend to undermined demand for the commodity-linked currency – the loonie.
Oil prices retreated further on Tuesday as investors seem unconvinced that a one-month extension of a record output cut by major produces might be enough to offset oversupply in the market. The concerns also overshadowed hopes for a swift recovery in demand, fueled by the easing of lockdown restrictions.
The combination of factors prompted some aggressive short-covering move around the USD/CAD pair. Bulls might now wait for some follow-through strength beyond the very important 200-day SMA support breakpoint before confirming that the pair has bottomed out and positioning for any further gains.
There isn’t any major market-moving economic data due for release on Tuesday. Hence, the broader market risk sentiment will continue to influence the USD demand, which along with oil price dynamics might produce some short-term trading opportunities.
Technical levels to watch
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