- A combination of factors prompted some fresh selling around USD/CAD on Tuesday.
- The prevalent upbeat market mood continued weighing on the safe-haven greenback.
- A modest uptick in oil prices underpinned the loonie and contributed to the selling bias.
The USD remained depressed through the early European session and dragged the USD/CAD pair to a strong horizontal support near the 1.2815 region.
Following the previous day’s two-way/directionless price moves, the pair met with some fresh supply on Tuesday and was pressured by a combination of factors. The US dollar was back under some selling pressure amid progress on additional US fiscal stimulus measures. The House of Representatives voted to increase the amount of COVID-19 relief payments to qualified Americans from $600 to $2,000 on Monday.
This comes on the back of the latest optimism over a post-Brexit trade deal, which further boosted investors’ appetite for riskier assets. This, in turn, was seen as one of the key factors that weighed on the greenback’s safe-haven status. Apart from this, a modest uptick in crude oil prices underpinned the commodity-linked currency – the loonie – and further contributed to the offered tone surrounding the USD/CAD pair.
Expectations that the US pandemic stimulus will help revive fuel demand pushed oil prices higher on Tuesday, marking its third day of a positive move in the previous four. However, investors remain worried about the discovery of a new faster-spreading variant of the coronavirus. This, along with the imposition of strict lockdowns/travel restrictions, might keep a lid on any strong gains for the commodity.
Hence, it will be prudent to wait for some follow-through selling below the 1.2800 mark before confirming that the recent USD/CAD recovery from multi-year lows might have already run out of the steam. This would eventually set the stage for further near-term weakness, though year-end thin trading volumes warrant some caution before placing aggressive bearish bets amid absent fundamental catalyst.
Technical levels to watch
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