- A combination of factors prompted some selling for the second consecutive session.
- The intraday downfall found decent support ahead of the 1.3000 psychological mark.
- Bullish oil prices undermined the loonie and might keep a lid on any strong move up.
The USD/CAD pair found decent support ahead of the key 1.3000 psychological mark and has now recovered around 50 pips from two-week lows.
The pair witnessed some heavy selling during the first half of the trading action on Tuesday and broke through the 1.3040 horizontal support. The intraday fall was sponsored by renewed US dollar selling since the early European session and bullish crude oil prices, which tend to underpin demand for the commodity-linked currency.
The greenback remained depressed on the back of growing speculations that the Fed will ease monetary policy further in December amid concerns about the economic fallout from the ever-increasing coronavirus cases. Adding to this, the optimism over a potential COVID-19 vaccine further dented the greenback's relative safe-haven status.
On the other hand, the Canadian dollar benefitted from the ongoing bullish run in crude oil prices. Prospects of an early rollout of vaccine for the highly contagious coronavirus disease revived hopes for a swift recovery in fuel demand. This, in turn, pushed WTI crude oil prices to three-month tops, around the $43.50-55 region.
Meanwhile, a modest uptick in the US Treasury bond yields helped limit any further losses for the greenback and assisted the USD/CAD pair to attract some dip-buying near the 1.3000 mark. That said, the attempted recovery lacked any strong follow-through and thus, warrants some caution before positioning for any further appreciating move.
Tuesday's US economic docket features the releases of the Conference Board's Consumer Confidence Index and Richmond Manufacturing Index. The data might influence the USD, which, along with oil price dynamics will be looked upon for some short-term trading opportunities.
Technical levels to watch
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