USD/CAD holds comfortably above 1.3900 mark, lacks follow-through amid rallying oil prices

The USD/CAD pair held on to its mildly positive tone through the early European session and was last seen trading with modest gains, comfortably above the 1.3900 round-figure mark. The uptick, however, lacked any strong follow-through and the pair remained well within a three-day-old trading range.

Growing market fears about the second wave of coronavirus infections and concerns over worsening US-China relations took its toll on the global risk sentiment. This coupled with Wednesday's dovish sounding FOMC meeting minutes benefitted the US dollar's perceived safe-haven status, which turned out to be one of the key factors that extended some support to the USD/CAD pair.

Tensions between the world's two largest economies escalated further after the US President Donald Trump accused China of running a massive disinformation campaign and mishandling the coronavirus outbreak at the initial stage. Adding to this, the US Senate passed a bill that could block some Chinese companies from selling shares on the American stock exchanges.

Meanwhile, a modest pickup in the USD demand, to some extent, was negated by the ongoing bullish momentum in crude oil prices. Signs of gradual demand recovery and a big drop in the US stockpiles led to the sixth consecutive day of a positive move in oil prices, which underpinned the commodity-linked currency – the loonie – and kept a lid on any strong gains for the major.

Hence, it will be prudent to wait for some strong follow-through buying before confirming that the USD/CAD pair might have formed a strong base near mid-1.3800s and positioning for any further near-term appreciating move.

Moving ahead, market participants now look forward to the US economic docket – featuring the release of Philly Fed Manufacturing Index, Initial Weekly Jobless Claims and Flash Manufacturing PMI. The data might influence the USD price dynamics and produce some meaningful trading opportunities later during the early North American session.

Technical levels to watch