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  • USD/CAD witnessed some fresh selling on Tuesday and eroded a part of the overnight strong gains.
  • The downtick was sponsored by a softer tone surrounding the USD and a modest bounce in oil prices.
  • The downside seems limited as investors might refrain from placing directional bets ahead of BoC.

The USD/CAD pair extended its steady intraday retracement slide and dropped to fresh session lows, around the 1.3170 region in the last hour.

A combination of negative factors failed to assist the pair to build on the previous day’s strong positive move of around 100 pips, instead prompted some fresh selling during the first half of the trading action on Tuesday.

Despite growing worries over the ever-increasing COVID-19 cases, the US dollar struggled to gain any meaningful traction and remained on the defensive amid the uncertain US political environment ahead of the November 3 presidential election.

On the other hand, a modest uptick in crude oil prices (now up nearly 1% for the day) underpinned the commodity-linked currency – the loonie. This, in turn, was seen as another factor that contributed to the offered tone surrounding the USD/USD pair.

However, investors remain concerned about the potential economic impact from renewed lockdown measures to curb the second wave of coronavirus infections. This, along with the lack of progress in the US stimulus talks should lend some support to the safe-haven USD.

Moreover, market participants might also refrain from placing any aggressive bets ahead of the latest monetary policy update by the Bank of Canada (BoC) on Wednesday. This warrants some caution before positioning for any further slide for the USD/CAD pair.

In the meantime, Tuesday’s US economic docket, highlighting the release of Durable Goods Orders data, will be looked upon for some impetus. Apart from this, the broader market risk sentiment will influence the USD price dynamics and produce some trading opportunities.

Technical levels to watch