The USD/CAD pair was closed at 1.28286 after placing a high of 1.28254 and a low of 1.27678. The USD/CAD pair was raised on Tuesday due to declining crude oil prices and improving the market’s risk sentiment. The risk sentiment in the market surged on Tuesday after a combination of supporting factors. The rising hopes for global economic recovery after the latest news that Great Britain has officially started using Pfizer coronavirus vaccine to treat coronavirus patients on Tuesday added to the market’s risk sentiment.
Another factor involved in the risk mood enhancement was the rising demand for a US coronavirus stimulus package. The continuous talks between Democrats and the Republicans over the stimulus package and the agreement of both sides over a bipartisan proposal of a $908 billion package also supported the market’s risk sentiment as it will enhance the US economic recovery.
Meanwhile, the latest comments from the foreign minister of China, Wang Yi, that Beijing was open to restarting its relationship with the US also added to the market’s risk flows. Wang declared that a year of escalating tensions between both countries had pushed them to a critical historical juncture. He also said the time has come that objectivity and rationality should bring back in the US policy towards China.
He stated that both sides should restart the dialogues and get back on the right track to rebuilding mutual trust in the next Sino-US relations phase. Wang blamed some Americans’ outdated Cold War mentality for the growing division between the US and China. The raised risk sentiment helped the USD/CAD pair rose for the second consecutive day.
On the data front, at 01:00 GMT, the Consumer Credit for October from the US fell to 7.2B against the estimated 17.6B and weighed on the US dollar. At 16:00 GMT, the NFIB Business Index declined to 101.4 against the anticipated 102.6 in November and weighed on the US dollar that capped further gains in the USD/CAD pair. At 18:30 GMT, the Revised Nonfarm Productivity for the quarter declined to 4.6% against the projected 4.9% and supported the US dollar and supported the USD/CAD pair’s an upward trend. The Revised Unit Labor Costs for the quarter grew in as -6.6% against the projected -8.9%, supported the US dollar and pushed the pair on the upside. At 20:00 GMT, the IBD/TIPP Economic Optimism came in as 49.0 in December compared to the previous 50.0.
Meanwhile, the USD/CAD pair’s gains were also supported by the declining Crude oil prices on Tuesday. The Crude oil prices posted losses on Tuesday and reached $45.13 on the day ahead of the American Petroleum Institute’s weekly crude oil stock data. The declining crude oil prices weighed on commodity-linked currency Loonie and ultimately added strength in the USD/CAD pair.
Furthermore, the Canadian dollar was also under pressure on Tuesday ahead of Wednesday’s Bank of Canada policy meeting. The central bank is expected to hold its interest rates at the same level, but the bank’s tone could affect the Canadian dollar as a positive message will act as a vote of confidence in the economy and support the local currency and vice versa.
Daily Technical Levels
Pivot point: 1.2802
The USD/CAD pair is trading sideways at the 1.2789 level due to a lack of market volatility. On the lower side, the support holds around the 1.2770 level, whereas the bullish trend continuation can extend the buying trend until the next resistance level of 1.2835. We may not see a further trend in the pair until this range gets violated. On the lower side, a bearish breakout of the 1.2770 level can extend selling bias until the 1.2720 level. It seems like investors are waiting for a solid fundamental to determine further moves in the market. Let’s look for selling below 1.2836 and buying over 1.2770 level today. Good luck!