USD/CAD rebounds from multi-week lows, steadies above 1.3100 mark
|- USD/CAD prolonged its recent downward trajectory and dropped to six-week lows on Wednesday.
- The optimism over the US fiscal stimulus weighed on the safe-haven USD and remained supportive.
- Sliding crude oil prices undermined the loonie and helped limit any further downside for the major.
The USD/CAD pair has managed to rebound around 35 pips from six-week lows and was last seen trading above the 1.3100 round-figure mark.
The pair extended its recent pullback from the 1.3260 region and witnessed some follow-through selling for the second consecutive session on Wednesday. The downtick also marked the third day of a negative move in the previous four and was sponsored by the heavily offered tone surrounding the US dollar.
The latest optimism about the next round of the US fiscal stimulus package boosted investors confidence and dented the greenback's safe-haven status. In fact, the USD Index fell to one-month lows, which, in turn, was seen as a key factor that kept exerting some pressure on the USD/CAD pair.
However, a fresh leg down in crude oil prices (down around 1.75% for the day) undermined the commodity-linked currency – the loonie – and assisted the USD/CAD pair to find some support near the 1.3080 region. The pair moved back above the 1.3100 mark, though lacked any strong follow-through.
Renewed lockdown measures to curb the second wave of coronavirus infections fueled fears about slower recovery in fuel demand. Adding to this, a build-up in the US inventory stoked concerns over a supply glut and exerted some downward pressure on crude oil prices through the mid-European session.
In the absence of any major market-moving economic releases, either from the US or Canada, the USD/oil price dynamics might continue to play a key role in influencing the USD/CAD pair. Hence, the key focus will be on development surrounding the US fiscal stimulus measures and coronavirus saga.
Technical levels to watch
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