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  • USD/CAD met with some fresh supply at higher levels amid the prevalent USD selling bias.
  • Increasing odds of an election victory for Joe Biden kept the USD bulls on the defensive.
  • Weaker crude oil prices undermined the loonie and helped limit losses ahead of the FOMC.

The USD/CAD pair retreated over 50 pips from daily swing highs and has now dropped to the lower end of its intraday trading range, around the 1.3125 region.

The pair struggled to capitalize on its early uptick, instead met with some fresh supply near the 1.3175-80 zone amid the prevalent selling bias surrounding the US dollar. As investors await the outcome of a nail-biting US presidential election, Democrat candidate Joe Biden’s lead over the incumbent Donald Trump was seen as a key factor weighing on the greenback.

However, the final result hangs on the vote count from a few remaining swing states. Moreover, Trump has already pursued lawsuits and a recount in key battleground states, which added to the uncertainty and dampened prospects for big stimulus packages to aid the COVID-19 hit economy. This resulted in a further decline in the US US Treasury bond yields and contributed to the USD selling.

Meanwhile, the downside seems cushioned on the back of a fresh leg down in crude oil prices, which tend to undermine demand for the commodity-linked currency – the loonie. Concerns that renewed lockdown measures to curb the second wave of coronavirus infections could weaken fuel demand kept exerting some pressure on oil, which was now down over 1.5% for the day.

Apart from the mentioned factors, investors might also be reluctant to place any aggressive bets ahead of the latest FOMC monetary policy update, due later during the US session. This, along with Friday’s monthly jobs report from the US and Canada will play a key role in determining the next leg of a directional move for the USD/CAD pair.

Technical levels to watch