USD/CAD continued gaining positive traction for the third consecutive session on Thursday. A softer risk tone benefitted the safe-haven USD and remained supportive of the momentum. A combination of factors warrants some caution before positioning for any meaningful upside.
The USD/CAD pair edged higher through the Asian session on Thursday and climbed to fresh weekly tops, around the 1.3090 region in the last hour.
The pair prolonged this week's recovery move from over two-year lows and gained positive traction for the third consecutive session. A modest pullback in the US equity futures benefitted the US dollar's relative safe-haven status, which, in turn, was seen driving the USD/CAD pair higher.
Despite a promising development in late-stage COVID-19 vaccine trials, investors seemed reluctant to take aggressive risk amid scepticism about the efficacy and the length of immunity provided. This was enough to lend some support to the greenback's status as the global reserve currency.
On the other hand, a bullish consolidation in crude oil prices did little to influence demand for the commodity-linked currency – the loonie – or provide any meaningful impetus to the USD/CAD pair. That said, a combination of factors are likely to keep a lid on any runaway rally for the major.
The global flight to safety was reinforced by a steep decline in the US Treasury bond yields. This, along with concerns the continuous surge in new infections the United States and reviving hopes for additional fiscal stimulus measures, might hold the USD bulls from placing aggressive bets.
This makes it prudent to wait for some strong follow-through selling, possibly beyond the 1.3100 mark, before confirming that the pair has bottomed out and positioning for any further near-term appreciating move.
Market participants now look forward to the US economic docket, highlighting the releases of the latest consumer inflation figures and the Initial Weekly Jobless Claims. The data, along with the broader market risk sentiment, will influence the USD and produce some trading opportunities.
