USD/CAD struggles for directions, stuck in a range below mid-1.3000s
- USD/CAD remained confined in a range for the second consecutive session on Wednesday.
- Concerns about the ever-increasing COVID-19 cases kept the USD bulls on the defensive.
- Bullish crude oil prices underpinned the loonie and further collaborated to cap the upside.
The USD/CAD pair extended its sideways consolidative price action through the early European session and remained confined in a range below mid-1.3000s.
The pair struggled to capitalize on this week's rebound from nine-month lows – around the 1.2930-25 region touched on Monday – and was being capped by a combination of factors. A promising development in late-stage COVID-19 vaccine trials was offset by concerns about the continuous surge in new cases across the United States.
In fact, several US states imposed stricter restrictions to curb the second wave of infections and revived hopes of a substantial stimulus package to support the economy. This, in turn, kept the US dollar bulls on the defensive and was seen as a key factor that kept a lid on the USD/CAD pair's attempted recovery move.
On the other hand, the latest optimism over a potential vaccine for the highly contagious coronavirus diseases boosted expectations for a swift recovery in the global fuel demand. This, along with a larger-than-expected fall in the US crude inventories pushed oil prices to fresh multi-month tops, around mid-$42.00s on Wednesday.
The ongoing bullish run in oil prices underpinned the commodity-linked currency – the loonie – and further collaborated toward capping the upside for the USD/CAD pair. That said, the downside remains cushioned, at least for the time being, as investors seemed reluctant to place bearish bets on the back of a bank holiday in the US and Canada.
Technical levels to watch