The USD/CAD currency pair succeeded in extending its winning streak of the previous day, hitting the session high above the 1.3150 level. However, the reason for the bullish sentiment surrounding the currency pair could be attributed to the weaker oil prices, which eventually undermined the demand for the commodity-linked currency, the loonie, and contributed to the gains for this currency pair.

Apart from this, the gains in this currency pair were further fueled after economic data from Canada showed a lower-than-expected rise in retail sales in August, which continued to exert a positive impact on the currency pair, by undermining the Canadian dollar. On the contrary, the weakness of the broad-based US dollar, triggered by the risk-on market sentiment, turned out to be a major factor that kept a lid on any further gains in the currency pair. Currently, the USD/CAD currency pair is trading at 1.3141, and consolidating in the range between 1.3080 and 1.3152.

Despite concerns about the ever-increasing number of coronavirus cases across the world, and worsening US-China relations, the investors continued to cheer the renewed optimism about the next round of the US fiscal stimulus package. These hopes came after the US House Speaker, Nancy Pelosi, spoke positively about the negotiations for the latest stimulus package with Treasury Secretary Steve Mnuchin, after policymakers missed the Tuesday-night deadline for the finalization of a deal. These hopes were further fueled after US President Trump said that he is willing to accept a large relief bill, despite the Republican Senate’s opposition. This eventually boosted the market trading sentiment and underpinned the Canadian dollar, which is perceived as a risk currency.

Apart from this, the market trading sentiment also received support from reports suggesting positive developments in the Brexit talks between the UK and the European Union (EU). This was witnessed after the two parties pleaded with one another for compromise, in order to save the fast-deteriorating negotiations.

As a result, the S&P 500 futures succeeded in extending the positive momentum of the previous day, remaining bullish on the day, which tended to undermine the demand for the safe-haven US dollar and extended support to the currency pair. On the USD front, the broad-based US dollar failed to erase the losses of the previous day, remaining under pressure on the day, mainly due to the market risk-on tone. Apart from this, the resurgence of the coronavirus continues to fuel fears that the economic recovery in the US could grind to a halt, and this is keeping the greenback under pressure. However, the losses in the US dollar could be considered the major factor that has kept a lid on any additional currency pair gains. Meanwhile, the US Dollar Index, which tracks the greenback against a basket of other currencies, has dropped to 92.597.

On the crude oil front, the WTI Crude Oil prices remained under selling pressure on the day. However, the reason for the decline in crude oil could also be attributed to the previous inventory reports from the private data provider, American Petroleum Institute (API), which fueled concerns about an oversupply and exerted some downward pressure on crude oil prices. Moreover, the losses in crude were further bolstered by the fears of a slower recovery in fuel demand, triggered by the renewed lockdown measures, in an effort to stop the second wave of coronavirus infections. Thus, the pullback in oil prices undermined the demand for the commodity-linked currency, the loonie, and remained supportive of the ongoing recovery momentum of the USD/CAD pair.

Across the pond, the gains in the currency pair were further fueled after the economic data from Canada showed a lower-than-expected rise in retail sales in August, and a rise in the CPI index  to 0.5% (year-over-year) in September, which in turn continued to have a positive impact on the currency pair, by undermining the Canadian dollar. In the absence of any major data/events on the day, market traders will keep their eyes on the movement of the USD and coronavirus headlines, which could play a key role in the performance of the currency pair.

Daily Support and Resistance
S1 1.2946
S2 1.3046
S3 1.3088
Pivot Point 1.3146
R1 1.3188
R2 1.3246
R3 1.3346

The USD/CAD is encountering an immediate resistance at the 1.3171 mark, and the formation of candles beneath this level is expected to direct the selling bias in the USD/CAD. The pair have lately concluded a doji candle below 1.3172, implying that the bullish sentiment is over, and sellers may soon penetrate the market. The very next candle for the USD/CAD is bearish, supported by a doji candle, indicating a strong selling sentiment for the pair. Let’s look for selling trades in USD/CAD pair.