USD/CAD side-lined below mid-1.3900s, Powell’s testimony awaited

• USD/CAD remained depressed through the mid-European session on Tuesday.
• The upbeat market mood, sliding US bond yields undermined the USD demand.
• A modest pickup in oil prices benefitted the loonie and exerted some pressure.
• Traders seemed reluctant to place aggressive bets ahead of Powell’s testimony.

The USD/CAD pair failed to capitalize on its attempted intraday recovery move, instead met with some fresh supply near the 1.3970 region. The pair was last seen trading with a mild negative bias near the 1.3925 region, well within the striking distance of one-week lows set earlier this Tuesday.

The pair remained depressed for the second straight session and was being weighed down by a combination of factors – sustained US dollar selling bias and positive crude oil prices. The pair, however, showed some resilience at lower levels and so far, has managed to defend the 1.3900 round-figure mark.

The optimism over the re-opening of economies in some parts of the world and encouraging data on coronavirus vaccine trial weighed on the USD’s safe-haven status. Adding to this, a modest pullback in the US Treasury bond yields also undermined the greenback demand and exerted some pressure on the USD/CAD pair.

This coupled with an intraday pickup in crude oil prices benefitted the commodity-linked currency – the loonie – and further contributed to the pair’s weaker tone through the mid-European session. Oil prices remained well supported by signs of gradual demand recovery on the back of easing lockdown restrictions globally.

Meanwhile, investors seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines ahead of the Fed Chair Jerome Powell’s congressional testimony. Powell’s comments will be closely scrutinized for any further monetary easing, which will play a key role in influencing the near-term USD price dynamics and provide a fresh directional impetus to the USD/CAD pair.

Technical levels to watch