USDCAD jumped to two-week highs on Monday amid a widespread risk aversion that hit high-yielding and commodity-related currencies. The pair briefly exceeded the 1.33 figure but failed to stage a daily close above this level and turned negative today. Still, the prices stay elevated, holding close to the psychological level as risk sentiment has deteriorated again following some shallow bullish attempts earlier in the day.
A combination of renewed dollar buying and the decline in oil prices keep the Canadian currency on the defensive amid the negative headlines related to the coronavirus. So, as long as investors remain cautious, upside risks will persist for the pair. As for oil, Brent crude is making recovery attempts on Tuesday following three days of a bearish correction from the $60 handle which continues to act as the key resistance.
There are no any major scheduled economic events in the United States and Canada, so traders’ focus will so far remain on the coronavirus theme amid further signs of coronavirus spreading across the globe, with the number of new cases in Italy, Iran, Japan and South Korea make investors worried over the state of the global economy and the outlook for oil demand.
On the other hand, the slowing downside momentum in the oil market underpins the loonie somehow. Brent is holding around $56, and the daily close above this level could signal the pressure is gradually easing. Should oil prices manage to regain ground, the USDCAD pair may retreat further from the current levels.
On the downside, there are strong support levels in the form of the 200- and 100-daily moving averages around 1.3210 and 1.3180, respectively. As long as the major remains above both these MAs, the upside potential persists. However, future dynamics in the pair will depend on risk sentiment and the direction in crude oil prices. In this context, the upcoming signals from OPEC+ will be important for the pair. So far, the group of producers haven’t made the final decision on the additional output cuts.