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  • A combination of factors assisted USD/CAD to gain traction for the second straight session.
  • A cautious mood benefitted the safe-haven USD; weaker oil prices undermined the loonie.
  • Investors look forward to the release of the Advance US Q4 GDP report for a fresh impetus.

The USD/CAD pair now seems to have entered a bullish consolidation phase and was seen oscillating in a range around mid-1.2800s, or just below multi-week tops set earlier this Thursday.

A combination of supporting factors assisted the pair to build on the previous day’s bullish breakout momentum through the 1.2770-80 supply zone and gain traction for the second consecutive session. The prevalent cautious mood around the equity markets extended some support the US dollar’s safe-haven status. Conversely, a softer tone surrounding crude oil prices undermined the commodity-linked loonie and provided an additional boost to the USD/CAD pair.

Following the overnight selloff in the US equity markets, investors turned more risk-averse amid doubts about the timing and size of a new US fiscal stimulus package. Adding to this, a delay in COVID-19 vaccine supplies and worries about the potential economic fallout from the coronavirus pandemic also weighed on the already weaker risk sentiment.

Meanwhile, the reintroduction of strict lockdown measured further contributed to dent investors’ confidence. The UK government on Wednesday announced new measures to clamp down on travel to and from Britain and indicated that the lockdown would last until March 8. Separately, China also sought to limit Lunar New Year trips to stem a surge in COVID-19 cases.

This, in turn, raised concerns about the recovery in fuel demand. This was evident from a modest pullback in crude oil prices, which extended some additional support to the USD/CAD pair. Bulls, however, took a breather and now seemed to have moved on the sidelines ahead of Thursday’s release of the Advance US Q4 GDP report.

The data, along with the broader market risk sentiment and the US stimulus headlines, will play a key role in influencing the USD price dynamics. Apart from this, developments surrounding the coronavirus saga could provide some impetus to the USD/CAD pair and allow traders to grab short-term opportunities.

Technical levels to watch