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USD/CAD Continues Trading Choppy Despite Falling Oil Prices - What's Next?

EagleFX

The USD/CAD was flashing green and drew bids around 1.3575 level due to the risk-on market sentiment, which undermined the broad-based U.S. dollar and sent the currency pair lower. The reason for the modest gains in the pair could also be attributed to the losses in the crude oil prices, which undermined the commodity-linked currency the Loonie and contributed to the currency pair declines. At the coronavirus front, the COVID-19 situation continued to worsen globally. As per data from Johns Hopkins University, in the latest numbers, more than 13.5 million people across the world have been diagnosed with COVID-19. However, the virus-related report has raised concerns among investors that the virus was far from over, and these concerns dampened hopes of economic recovery.

Despite the continued surge in the number of coronavirus cases globally and the ongoing Sino-American conflict, the market traders cheered the optimism concerning the success of the vaccine confirmed by the upbeat signals from Moderna and U.S. President Donald Trump's comments on the COVID-19 vaccine. Although, the hopes of vaccine success raised after Moderna's potential vaccine produced a "robust" immune response in all 45 patients in its early-stage human trials, providing more promising data that the vaccine may give some protection against the coronavirus. As well as, Dr. Anthony Fauci, the leading expert on infectious diseases in the U.S., also joined optimism while saying that the country will meet its goal regarding COVID-19 vaccine by year's end, driving expectations of an economic recovery.

Apart from virus worries, the Sino-American tension was heated as the U.S. rolled out heavy sanctions on China's ruling party members. As per the White House Chief of Staff, Mark Meadows, the Trump administration is studying national security risks of TikTok, WeChat, and other apps that allow a foreign adversary to gather information on users. However, these intensifying concerns about worsening US-China relations exerted some downside pressure on the risk sentiment.

At the crude oil front, WTI crude oil prices drew an offer around below $41 on the day backed by the growing uncertainty about global recovery in fuel demand as new COVID-19 cases surge in several countries. Moreover, the declines in crude oil were further bolstered by the reports that OPEC and its allies (PEC+) agreed to taper record supply curbs from August. Thus, the pullback in oil prices weakened the desire for the commodity-linked currency – the Loonie – and remained supportive of the USD/CAD pair's ongoing recovery momentum.

In the absence of the major data/events on the day, the market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum. As well as, the traders will keep their eyes on the virus updates and news concerning China. Though, the U.S. Michigan Consumer Sentiment Index, expected 79.00 against the previous 78.1, could offer intermediate moves.


Daily Support and Resistance

    • S1 1.3394
    • S2 1.3473
    • S3 1.3523

Pivot Point 1.3552

    • R1 1.3603
    • R2 1.3632
    • R3 1.3711

The USD/CAD is trading below a strong resistance level of 1.3589 level, which is extended by the horizontal trendline. Right now, the USD/CAD is holding over 50 EMA levels, but the market is unable to decide whether to go long or short until it breaks out of a narrow trading range of 1.3590 - 1.3560. Over 1.3590, the pair can go after 1.3633 level, while the bearish crossover of 1.3560 level can trigger selling until 1.3520 and 1.3500. Let's wait for a breakout ahead of taking any position in USD/CAD. Good luck!

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