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  • A combination of factors prompted some fresh selling around USD/CAD on Monday.
  • The US election outcome, dovish Fed expectations continued weighing on the USD.
  • A strong pickup in oil prices underpinned the loonie and contributed to selling bias.

The USD/CAD pair remained depressed through the early European session, with bears still awaiting a sustained break below the key 1.3000 psychological mark.

Following the previous session’s directionless price moves, the pair met with some fresh supply on the first day of a new trading week and was pressured by a combination of factors. The Democratic candidate Joe Biden’s victory in a nail-biting US Presidential election eliminated some of the uncertainties and remained supportive of the prevalent upbeat market mood.

Meanwhile, the possibility of a split Congress fueled speculations that the Fed might be forced to ease further to combat the economic fallout from the continuous surge in COVID-19 infections. The risk-on flows, along with dovish Fed expectations kept the US dollar bulls on the defensive, which, in turn, was seen as a key factor exerting some pressure on the USD/CAD pair.

Meanwhile, a goodish intraday pickup in crude oil prices underpinned the commodity-linked currency – the loonie. This, along with a softer tone surrounding the greenback further contributed to the offered tone surrounding the USD/CAD pair. However, the lack of any strong follow-through selling warrants some caution before positioning for any further depreciating move.

That said, sustained weakness below the 1.3000 psychological mark will be seen as a fresh trigger for bearish traders and turn the USD/CAD pair vulnerable to prolong its recent downward trajectory. In the absence of any major market-moving economic releases, the pair remains at the mercy of the USD/oil price dynamics and the broader market risk sentiment.

Technical levels to watch