USD/CAD rebounds from 3-month lows, lacks follow-through
- Sliding Oil prices undermined the Loonie and prompted some short-covering move.
- A subdued USD demand did little to provide any boost to attempted intraday bounce.
- Mixed US economic data passed unnoticed ahead of Wednesday’s key event risks.
The USD/CAD pair quickly reversed an early dip to fresh three-month lows and rallied around 30 pips, back closer to session tops in the last hour.
The ongoing downfall in Crude Oil prices, now down 1.5% for the day, undermined demand for the commodity-linked currency – Loonie and turned out to be one of the key factors that prompted some intraday short-covering move amid slight near-term oversold conditions.
Subdued USD demand offset weaker oil prices
On the other hand, the US Dollar struggled to gain any meaningful traction and continued with its subdued trading action following the release of softer US Consumer Confidence Index, which largely negated stronger pending homes sales data.
Apart from weakness in Oil prices, the uptick lacked any obvious catalyst and might struggle to attract any strong follow-through buying as investors start repositioning for Wednesday's key event risks - the BoC policy update and the highly anticipated FOMC decision.
Hence, it will be prudent to wait for a sustained move back above the 1.3090-1.3100 region before confirming that the pair might have actually bottomed out in the near-term and placing aggressive bets for any further near-term appreciating move back towards the 1.3200 handle.
Technical levels to watch