- USD / CAD has struggled to take advantage of the positive rally the day before from the nine-month lows.
- USD bulls remain on the defensive amid a further downward movement in US bond yields.
- A positive tone around oil prices supports the CAD and helps limit the pair’s gains.
The pair USD / CAD lacks a strong directional bias and remains trapped within a narrow range, just above the 1.3000 level, during the European session on Tuesday.
A combination of factors it has not helped the pair to capitalize on the positive rebound of the previous day, from around 75-80 pips from the nine-month lows, and has led to moderate and limited price action within a range on Tuesday. The euphoria over the COVID-19 vaccine witnessed the previous day faded rather quickly amid skepticism about the efficacy and duration of the immunity provided.
Nervousness benefited the safe-haven US dollar against the Canadian currency and extended some support to the USD / CAD pair. The flight to the safe haven was reinforced by a new downward movement in U.S. Treasury yields, preventing USD bulls from opening aggressive positions and limited any significant positive movement for the pair.
Apart of this, positive trade sentiment around crude oil prices has benefited demand for the loonie, a currency linked to the prices of raw materials, and has been considered a key factor that has helped limit the gains of the USD / CAD pair. This makes it prudent to wait for some solid continuation buying before positioning for any further bullish movement.
In the absence of major economic releases, either from the US or Canada, the USD / CAD pair remains at the mercy of the USD and oil price dynamics. That being said, any recovery attempt could still be seen as a selling opportunity and risks fading quickly near the breakout point of the short-term uptrend line support, around the 1.3100 level.
Credits: Forex Street
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