- The USD / CAD rose slightly on Thursday amid a modest recovery in demand for USD.
- The escalating US-China tensions have benefited the safe haven status of the USD.
- The continued upward trend in oil prices supported the loonie and capped gains.
The USD / CAD pair kept its slightly positive tone at the start of the European session and was last seen with modest gains, comfortably above the 1.3900 level. The rally, however, had no solid follow-up and the pair remained well within a three-day trading range.
Growing market fears about the second wave of coronavirus infections and concerns about worsening Sino-US relations have weighed on the sense of global risk. This, coupled with Wednesday’s FOMC meeting minutes, benefited the safe haven status of the US dollar, which has proven to be one of the key factors that have extended support for the USD / CAD pair.
Tensions between the two largest economies in the world have escalated further after U.S. President Donald Trump accused China of waging a massive disinformation campaign and mismanaging the early coronavirus epidemic. Adding to that, the United States Senate has passed a bill that could prevent some Chinese companies from selling stocks on American stock exchanges.
At the same time, a slight recovery in demand for USD was offset to some extent by the continued upward momentum in crude oil prices. Signs of a gradual recovery in demand and a sharp drop in US stocks led to the sixth consecutive day of positive oil price developments, which supported the commodity-linked currency – the loonie – and kept a lid on the major major’s earnings.
Therefore, it will be prudent to wait for solid follow-up purchases before confirming that the USD / CAD pair may have formed a solid base in the mid-1.3800 range and positioning for any further near-term appreciation.
Going forward, market players are now eagerly awaiting the US economic record – with the release of the Philly Fed Manufacturing Index, initial jobless weekly demand and the manufacturing PMI Flash. The data could influence the price dynamics in USD and generate significant trading opportunities later at the start of the North American session.