USD/CAD slides to three-day lows, further below mid-1.3100s

The USD/CAD pair edged lower through the first half of the trading action on Tuesday and dropped to three-day lows, around the 1.3135 region in the last hour.

Following the previous day's directionless price moves, the pair came under some fresh selling pressure on Tuesday and was being weighed down by the heavily offered tone surrounding the US dollar. The latest optimism over a potential vaccine for the highly contagious coronavirus disease remained supportive of the upbeat market mood. This, in turn, forced investors to continue dumping the safe-haven greenback.

The global risk sentiment to a strong boost after AstraZeneca resumed phase-3 clinical trials of its COVID-19 vaccine candidate. Adding to this, Pfizer and BioNTech announced that they are also looking to expand the trials for their own candidates. The risk-on flow remained unabated, instead picked up pace during the Asian session on Tuesday following the release of stronger-than-expected Chinese industrial production data.

Meanwhile, a subdued/range-bound trading action around crude oil prices did little to influence the commodity-linked currency – the loonie – or provide any meaningful impetus to the USD/CAD pair. With the USD price dynamics turning out to be an exclusive driver of the pair's intraday move, the downside is likely to remain limited as investors might refrain from placing any aggressive bets ahead of the FOMC decision on Wednesday.

Heading into the key central bank event, Tuesday's US economic data will be looked upon for some short-term trading opportunities. The US economic docket features the release of Empire State Manufacturing Index and Industrial Production data, due later during the early North American session.

Technical levels to watch