USD/CAD struggles for direction, stuck in a range below 1.3100 mark

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  • USD/CAD was seen consolidating in a narrow range below the 1.3100 mark on Friday.
  • COVID-19 jitters, dovish Fed expectations weighed on the USD and capped the upside.
  • A modest pullback in crude oil prices undermined the loonie and extended some support.

The USD/CAD pair struggled for a firm directional bias and seesawed between tepid gains/minor losses, around the 1.3075 region through the early European session.

A combination of diverging factors failed to provide any meaningful impetus to the major and led to a subdued/range-bound price action on the last trading day of the week. Concerns about the economic fallout from new COVID-19 restrictions in several US states kept the US dollar bulls on the defensive. This, in turn, was seen as a key factor capping the upside for the USD/CAD pair.

The greenback was further pressured by speculations for additional monetary policy easing by the Fed. That said, a fresh leg down in the equity markets extended some support to the USD’s perceived safe-haven status. The global risk sentiment took a hit on Friday after the US Treasury Secretary Steven Mnuchin called for an end to coronavirus pandemic relief for struggling businesses.

Apart from this, a modest pullback in crude oil prices undermined the commodity-linked currency – the loonie – and further collaborated towards limiting any meaningful downside for the USD/CAD pair. The continuous surge in new coronavirus cases across the globe dampened prospects for a swift recovery in fuel demand and exerted some downward pressure on crude oil prices.

Moving ahead, market participants now look forward to the release of Canadian monthly retail sales data for some impetus. This, along with the broader market risk sentiment and developments surrounding the coronavirus saga, will influence the USD price dynamics and assist traders to grab some short-term opportunities.

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