- USD/CAD came under some renewed selling pressure on Thursday amid softer USD.
- A modest pullback in oil prices undermined the loonie and helped limit the downside.
- Holiday-thinned liquidity conditions also held traders from placing fresh bearish bets.
The USD/CAD pair edged lower during the early North American session and was last seen trading near the lower end of its daily range, just below the key 1.3000 psychological mark.
The pair failed to capitalize on the previous day’s modest bounce from over two-week lows, instead met with some fresh supply on Thursday and was pressured by a softer tone surrounding the US dollar. Optimism over the development of a COVID-19 vaccine, along with clarity on the US political front and softer US macro data dragged the USD to its lowest level in more than two months.
It is worth recalling that President-elect Joe Biden was formally given a go-ahead to start his transition to the White House. This comes on the back of the progress on remedies for the highly contagious coronavirus disease and boosted investors’ confidence. This, in turn, was seen as one of the key factors that continued denting the greenback’s safe-haven status.
Apart from this, the greenback was further pressured by Wednesday’s data, which showed that the number of Americans filing for unemployment insurance unexpectedly jumped to 778K last week. The downbeat report suggests that imposition of new COVID-19 restrictions was undermining the labor market recovery and further fueled speculations for additional easing by the Fed.
Meanwhile, the minutes of the November 4-5 FOMC meeting revealed that policymakers debated a range of options to tweak the bond-buying program to support the economic recovery. Participants also judged that an update on its guidance for asset purchases was needed fairly soon and noted the committee could provide more accommodation, if appropriate.
However, a modest pullback in crude oil prices undermined the commodity-linked currency – the loonie – and extended some support to the USD/CAD pair, at least for the time being. Moreover, relatively thin liquidity conditions on the back of the Thanksgiving holiday in the US further warrant some caution for bearish traders and positioning for any further downside.