USD/CAD flirts with 1.3040 horizontal support amid weaker USD, bullish oil prices
- A combination of factors prompted some fresh selling around USD/CAD on Tuesday.
- Dovish Fed expectations, COVID-19 vaccine optimism weighed on the safe-haven USD.
- Positive oil prices underpinned the loonie and contributed to the intraday selling bias.
The USD/CAD pair traded with a negative bias through the early European session and was last seen flirting with a strong horizontal support, around the 1.3045-40 region.
Following the previous day's good two-way price swings, the pair met with some fresh supply on Tuesday and was being pressured by a combination of factors. The US dollar struggled to capitalize on its overnight goodish rebound that came following the release of upbeat US PMI prints for November. Apart from this, a positive tone around crude oil prices underpinned the commodity-linked loonie and exerted some pressure on the USD/CAD pair.
The greenback remained depressed on the back of growing market speculations that the Fed might ease monetary policy in December amid concerns about the economic fallout from the continuous surge in new coronavirus cases. Adding to this, the latest optimism over a potential early rollout of COVID-19 vaccines remained supportive of the prevalent risk-on environment. This added to the selling bias surrounding the safe-haven greenback.
Meanwhile, additional reports of successful COVID-19 vaccine trials revived hopes for a speedy global economic recovery and a pickup in energy demand. It is worth recalling that AstraZeneca said on Monday its COVID-19 vaccine was 70% to 90% effective in pivotal trials. This, in turn, pushed WTI crude oil prices to the highest level since March and benefitted the Canadian dollar, which further contributed to the USD/CAD pair's intraday slide.
From a technical perspective, sustained weakness below the 1.3040 support zone will be seen as a fresh trigger for bearish traders and turn the USD/CAD pair vulnerable to break below the key 1.3000 psychological mark. The downward trajectory could further get extended towards monthly swing lows, around the 1.2930-25 region.
Market participants now look forward to the US economic docket, featuring the releases of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index. The data, along with the broader market risk sentiment, might influence the USD price dynamics and assist traders to grab some short-term opportunities.
Technical levels to watch
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
