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  • USD/CAD was seen consolidating in a narrow trading band just below mid-1.2800s.
  • The underlying bullish sentiment weighed on the safe-haven USD and capped gains.
  • A softer tone around oil prices undermined the loonie and helped limit the downside.

The USD/CAD pair struggled for a firm direction on Thursday and remained confined in a 20 pips narrow trading band, around mid-1.2800s through the early European session.

A combination of diverging forces failed to provide any meaningful impetus to the major and led to a subdued/range-bound price move amid thin liquidity conditions on Christmas eve. The optimism about an imminent post-Brexit trade deal largely offset the US President Donald Trump’s threat to not sign a long-awaited $892 billion COVID-19 stimulus bill. This, in turn, boosted investors’ confidence, which undermined the US dollar’s safe-haven demand and capped gains for the USD/CAD pair.

However, the discovery of a new fast-spreading variant of the coronavirus and the imposition of strick lockdowns/travel restrictions in the UK dampened prospects for a recovery in the global fuel demand. This was evident from a softer tone surrounding crude oil prices. This was seen as a key factor weighing on the commodity-linked loonie and helped limit losses for the USD/CAD pair.

Meanwhile, investors now seemed reluctant to place any aggressive bets, rather preferred to remain on the sidelines ahead of the Christmas holiday break. In the absence of any major market-moving economic releases, the incoming Brexit headlines, along with fresh developments surrounding the coronavirus saga might influence some volatility and produce some trading opportunities around the USD/CAD pair.

Technical levels to watch