- USD/CAD struggled to build on the overnight goodish rebound from nine-month lows.
- The USD bulls remained on the defensive amid a fresh leg down in the US bond yields.
- A positive tone around oil prices underpinned the loonie and collaborated to cap gains.
The USD/CAD pair lacked any firm directional bias and remained confined in a narrow trading band, just above the 1.3000 mark through the early European session.
A combination of factors failed to assist the pair to capitalize on the overnight goodish rebound of around 75-80 pips from nine-month lows and led to a subdued/range-bound price action on Tuesday. The COVID-19 vaccine euphoria witnessed in the previous session faded rather quickly amid scepticism about the efficacy and the length of immunity provided.
The nervousness benefitted the US dollar’s relative safe-haven status against its Canadian counterpart and extended some support to the USD/CAD pair. The flight to safety was reinforced by a fresh leg down in the US Treasury bond yields, which held the USD bulls from placing aggressive bets and kept a lid on any meaningful positive move for the major.
Apart from this, a positive trading sentiment around crude oil prices underpinned the commodity-linked currency – the loonie – and further seen as a key factor that contributed towards capping gains for the USD/CAD pair. This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move.
In the absence of any major market-moving economic releases, either from the US or Canada, the USD/CAD pair remains at the mercy of the USD/oil price dynamics. That said, any attempted recovery move might still be seen as a selling opportunity and runs the risk of fizzling out quickly near a short-term ascending trend-line support breakpoint, around the 1.3100 mark.
Technical levels to watch
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