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  • USD/CAD trades near two-month lows alongside an oil price rally. 
  • The US dollar remains on the offer on expectations for additional US fiscal stimulus. 
  • A potential pullback in stocks could draw bids for the greenback.

The USD/CAD pair is consolidating near a two-month low of 1.2852 reached Thursday. The oil rally looks to be supporting the Canadian dollar. 

West Texas Intermediate (WTI) crude, the North American oil benchmark, is trading 1.8% higher on the day near $46.40 per barrel. On Thursday, the OPEC+, a group of major producers led by Saudi Arabia and Russia, reached an agreement to add in 500,000 barrels per day in January to its oil production quotas. The total production cut in January will now be 7.2 million barrels per day (bpd) versus 7.7 million bpd as of now. 

Apart from the oil rally, the broad-based US dollar weakness looks to be keeping the USD/CAD pair under pressure. The sentiment around the greenback remains bearish on hopes for a quick global economic recovery on potential coronavirus vaccines and expectations for additional fiscal stimulus. 

President-elect Joe Biden was out on the wires a few minutes before press time, stating that the coronavirus aid bill should be passed and called the $900 billion package as a good start. Biden added that he would ask for more after swearing-in as President. 

Analysts polled by Reuters expect the US dollar’s bearish trend to continue for at least six months. In other words, the path of least resistance for USD/CAD is to the downside. 

According to Morgan Stanley analyst, the US stocks are looking overbought and due for a pullback. Should the equities face selling pressure, the greenback will likely see a corrective bounce. 

Technical levels