During Tuesday’s early European trading session, the USD/CAD currency pair failed to stop its losing streak of the previous session, remaining depressed around the 1.3035-40 level, mainly due to the weakness of the broad-based US dollar. However, the prevalent downtrend in the greenback was being forced by a combination of factors, including optimism over potential vaccines for the highly infectious coronavirus, Dovish expectations from the Fed and the resurgence of coronavirus cases in the US, all of which have been weighed on the US dollar and contributing to the losses in the currency pair.

Across the pond, the reason for the declines in the currency pair could also be attributed to the sharp upticks in the crude oil prices, which tend to underpin the commodity-linked currency, the loonie, and contribute to the losses for this pair. However, the crude oil prices are receiving support due to the optimism over potential vaccines for COVID-19, which have fueled hopes for a recovery in the fuel demand and contributed to gains in crude. Currently, the USD/CAD is trading at 1.3033, and consolidating in the range between 1.3024 and 1.3086.

Despite the prevalent worries over the global economic recovery from coronavirus (COVID-19) in the US and Europe, the market trading sentiment has remained supported by optimism over news of potential COVID-19 vaccines. In this direction, hopes were further boosted after the US announced that it will probably start a vaccination program by Dec. 12, which in turn boosted hopes for gradual recovery in global economics. In addition to this, AstraZeneca said that its COVID-19 vaccine was 70% to 90% effective in pivotal trials, which also lent support to the market trading sentiment.

Furthermore, the market risk sentiment was boosted by reports suggesting that US President-elect Joe Biden had received the go-ahead to begin his transition to the White House. As per the latest report, the US General Services Administration (GSA) told President-elect Joe Biden that the Trump administration had approved the commencement of the formal transition process, citing a letter from administrator Emily Murphy, which was sent on Monday afternoon, American time. This took place after President Donald Trump finally accepted his defeat, paving the way for a smooth transition. 

Thereby, the S&P 500 futures succeeded in extending its bullish rally of the previous session, remaining bullish on the day, which undermined the demand for the safe-haven US dollar and extended support for the currency pair. On the USD front, the broad-based US dollar failed to erase its  losses of the previous session, remaining under pressure, mainly due to the marker risk-on tone. Apart from this, the resurgence of the coronavirus keeps fueling fears that the US economic recovery could grind to a halt, keeping the greenback under pressure as a result. In the meantime, the on-going expectations over easing monetary policy by the Fed in December, amid worries about the economic fallout from the continuous surge in new coronavirus cases, put additional pressure on the greenback. Overall, the losses in the US Dollar could be considered the primary factor that has kept the currency pair lower. Meanwhile, by 10:02 PM ET (2:02 AM GMT), the US Dollar Index, which tracks the greenback against a bucket of other currencies, had dropped by 0.03%, to 92.487.

On the crude oil front, the WTI Crude Oil prices managed to extend their bullish streak of the previous day, taking some further bids above the mid-$ 43 level on the day, backed by optimism over a potential rollout of COVID-19 vaccines soon, which boosted hopes for a quick global economic recovery and a pickup in energy demand. Apart from this, the gains in the crude oil prices were further bolstered by the hopes that OPEC+ will keep up its current supply restrictions, in order to reduce worries over the weaker oil demand, due to rising numbers of COVID-19 cases and higher oil production from Libya. Thus, the upticks in the crude oil prices underpinned the commodity-linked currency, the Loonie, and exerted some downside pressure on the currency pair.

Looking ahead, the market traders will keep their eyes on the US economic calendar, where the releases from the Conference Board’s Consumer Confidence Index and the Richmond Manufacturing Index are due. This data is likely to influence the USD price dynamics and help traders to get some new direction. All in all, the updates surrounding the Brexit, the coronavirus and the US stimulus package will not lose any significance.

Daily Support and Resistance

S 1 1.2946

S 2 1.3013

S 3 1.3048

Pivot Point 1.308

R 1 1.3115

R 2 1.3148

R 3 1.3215

The USD/CAD is breaking below the 1.3046 support level, on the back of a weak US dollar. The loonie pair may head towards the support level of 1.2977 level, which is extended by double bottom, along with the next support area at the 1.2950 level. As long as the resistance stays at 1.3046 and below this level, it’s worth taking a sell position. Let’s buckle up for this trade. Good luck!