USD/CAD Violates Descending Triangle Pattern – Signal Update!

During Monday’s Asian trading session, the USD/CAD currency pair failed to stop its overnight losses and remain depressed around below the 1.2750 level due to the broad-based U.S. dollar weakness. The prevalent downtrend in the greenback was mainly tied to the fresh optimism over a potential vaccine for the highly contagious coronavirus disease, which kept the market trading sentiment positive and undermined the safe-haven USD dollar. Furthermore, the U.S. dollar losses were further bolstered by the renewed probabilities that the Fed will keep interest rates low for an extended period at its last policy meeting of 2020.

Across the pond, the reason for the declines in the currency pair could also be attributed to the fresh upticks in the crude oil prices, which tend to underpin the commodity-linked currency the Loonie and contributes to the currency pair’s losses. However, the crude oil prices were supported by prevalent optimism over a potential vaccine for the highly infectious coronavirus disease, which ultimately fueled hopes for a recovery in fuel demand and contributed to the crude oil price gains. As of writing, the USD/CAD currency pair is currently trading at 1.2755 and consolidating in the range between 1.2745 – 1.2764.

As we already mentioned, the market trading sentiment represented positive performance on the day as the bullish appearance of Asia-Pacific stocks and upticks of the U.S. 10-year Treasury yields tend to highlight the risk-on mood being supportive by optimism over a potential vaccine/treatment for the highly infectious coronavirus. It is worth recalling that the U.S. Food and Drug Administration (FDA) provided emergency use permission to BNT162b2, the COVID-19 vaccine co-developed by Pfizer (NYSE: PFE) and BioNTech SE (F:22UAy) on Dec. 11. The approval will see the first U.S. deliveries of BNT162b2 later in the day, which lifted hopes that the world’s largest economy will likely see a reduction in the COVID-19 cases.

At the USD front, the broad-based U.S. dollar failed to erase its overnight losses and remained under pressure on the day mainly due to the market risk-on tone. Apart from this, coronavirus’s resurgence keeps fueling the fears that the U.S. economic recovery could be halt, which also keeps the greenback under pressure. On the other hand, the U.S. dollar losses were further bolstered by the expectations that the Fed will keep interest rates low for an extended period at its last policy meeting of 2020. However, the U.S. dollar losses could be considered the major factor that kept the currency pair lower. Meantime, the U.S. Dollar Index, which tracks the greenback against a bucket of other currencies, dropped by 0.03% to 92.487 by 10:02 PM ET (2:02 AM GMT).

At the crude oil front, WTI crude oil prices remained well bid around closer to $47.00 on the day, backed by the prevalent optimism over a potential vaccine for the highly infectious coronavirus disease, which ultimately fueled hopes for a recovery in fuel demand and contributed to the crude oil price gains. Apart from this, the reason for the crude oil gains could also be associated with fresh, positive reports suggesting an extension of Brexit talks between the U.K. and the European Union (E.U.), which eased global fuel demand worries and contributed to the crude oil price gains. Thus, the crude oil prices’ upticks underpinned the commodity-linked currency the Loonie and exerted some downside pressure on the currency pair.

In the absence of significant data/events on the day, the market traders will keep their eyes on the continuous drama surrounding the U.S. stimulus package. In the meantime, the risk catalyst like geopolitics and the virus woes, not to forget the Brexit, will also be key to watch for a fresh direction.

Daily Support and Resistance

S1 1.2613

S2 1.2687

S3 1.2727

Pivot Point 1.276

R1 1.28

R2 1.2833

R3 1.2907

Entry Price – Sell 1.274

Stop Loss – 1.2733

Take Profit – 1.27

Risk to Reward – 1:1

Profit & Loss Per Standard Lot = -$400/ +$400