- USD/CAD struggled to capitalize on the overnight bounce and witnessed some selling on Thursday.
- A modest uptick in crude oil prices underpinned the loonie and exerted some pressure on the pair.
- The cautious mood extended some support to the safe-haven USD amid stalled US stimulus talks.
The USD/CAD pair witnessed some selling during the early part of the European session and refreshed daily lows, around the 1.2790 region in the last hour.
A combination of factors failed to assist the pair to build on the previous day’s post-BoC recovery move from the 1.2770-65 support zone, or the lowest level since May 2018. The Canadian central bank opted for a wait and see approach on the impact of COVID-19 on the economy and on the rollout of vaccines.
As expected, the BoC left its key interest rate unchanged at 0.25% and said it would maintain its current policy of quantitative easing. The accompanying policy statement revealed that rates would remain at their effective lower bound until economic slack is absorbed, which under the current projections will not happen until 2023.
As investors looked past the BoC monetary policy update, a modest uptick in crude oil prices extended some support to the commodity-linked currency – the loonie. This, along with a subdued US dollar price action, turned out to be key factors that prompted some selling around the USD/CAD pair during the first half of the action on Thursday.
Meanwhile, stalled US stimulus talks raised now seemed to have raised doubts on whether the Republicans and Democrats can reach a consensus over the proposed a relief package. Apart from this, a deadlock in the post-Brexit trade talks weighed on investors’ sentiment. This, in turn, might drive some haven flows back towards the greenback and help limit the downside.
Market participants now look forward to the US economic docket, highlighting the releases of the latest consumer inflation figures and Initial Weekly Jobless Claims. The data, along with the US stimulus headlines, will influence the USD and produce some short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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