Search ForexCrunch
  • USD/CAD edged lower during the Asian session on Tuesday, albeit lacked follow-through.
  • A weaker tone surrounding oil prices weighed on the loonie and extended some support.
  • Positive US bond yields, COVID-19 jitters underpinned the USD and helped limit losses.

The USD/CAD pair traded with a mild negative bias through the Asian session and was last seen hovering near the lower end of its daily range, just below the 1.2800 mark.

The pair witnessed some selling during the early part of the trading action on Tuesday and eroded a part of the overnight modest recovery move from the lowest level since April 2018. Despite a modest pickup in the US Treasury bond yields, expectations for more US fiscal stimulus measures held the US dollar bulls on the defensive and exerted some pressure on the USD/CAD pair.

However, growing market worries about the continuous surge in new COVID-19 infections extended some support to the USD’s status as the global reserve currency. Adding to this, a weaker tone surrounding crude oil prices undermined demand for the commodity-linked currency – the loonie – and might further contribute to limit any deeper losses for the USD/CAD pair, at least for now.

From a technical perspective, the pair’s inability to register any meaningful recovery and the subsequent downtick suggests that the near-term bearish trend might still be far from being over. That said, oversold conditions on short-term charts warrant some caution for aggressive bearish trades and before positioning for any further depreciating move for the USD/CAD pair.

There isn’t any major market-moving economic data due for releases on Tuesday, either from the US or Canada. Hence, the broader market risk sentiment will play a key role in influencing the safe-haven USD. This, along with oil price dynamics, will be looked upon for some short-term trading opportunities ahead of the BoC monetary policy decision on Wednesday.

Technical levels to watch