- USD / CAD has fallen below the 1.2700 level for the first time since April 2018 in recent trading.
- Hopes for US fiscal stimulus linger behind a broader moving risk that has caused the pair to drop.
- Looking ahead, loonie traders are on the lookout for Governor Tiff Macklem’s BoC speech at 7:30 PM GMT.
He USD / CAD it has been pushing south on Tuesday and dipped to fresh yearly lows below the 1.2700 level in recent trade. Increasing risk in market sentiment, as well as technical selling, has driven the pair down. USD / CAD is now practically trading at 1.2700 with losses on the day of around 60 pips or 0.5%, and the pair has now completed a 100 pip reversal from Monday’s highs and is trading at its lowest level since April 2018. .
U.S. equity markets have seen a rally in recent trading (the S&P 500 was up 1% on the day near 3,690), while the WTI trades just below post-pandemic highs around $ 47.50 up almost 1.0% on the day. The CAD has a strong positive correlation with both asset classes and is therefore experiencing a rise together, while the dollar as a safe haven is experiencing a decline. Of course, this is not a good combination for USD / CAD, hence its recent decline.
Optimism that Republicans and Democrats will be able to agree on additional Covid-19 help appears to be driving sentiment. Regarding the latter, the Speaker of the United States House of Representatives, Nancy Pelosi (leader of the Democratic majority in the House) will speak with the leader of the Republican majority in the Senate, Mitch McConnell, and the leaders of the minorities. of the House and Senate, Chuck Schumer and Kevin McCarthy, to discuss the ending of government funding and Covid-19 Relief at 9:00 p.m. GMT.
Before this crucial meeting, a Politico report citing negotiating insiders fueled optimistic sentiment; Sources said Pelosi and McConnell will not conclude during the year until a deal with Covid-19 is reached.
Technical selling adds to USD / CAD woes
The decline in USD / CAD as a result of risk driven fundamentals is being exacerbated by technical selling; USD / CAD broke down from a medium-term pennant, as described in a previous article on the pair. Traders could now look for a pullback to the upside, which means that last week’s low at 1.2707 will be important to watch as resistance, as will last Friday’s and Monday’s lows at 1.2720.
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