USD/CAD flirts with two-week lows, below mid-1.2700s

• USD/CAD edged lower for the fourth consecutive session on Thursday amid sustained USD selling.
• The prevalent upbeat market mood was seen as a key factor weighing on the safe-haven greenback.
• Crude oil prices consolidated recent gains to multi-month tops and did little to influence the loonie.

The USD/CAD pair remained depressed through the Asian session and was last seen trading near two-week lows, just below mid-1.2700s.

The pair extended its recent pullback from levels just above mid-1.2900s and witnessed some follow-through selling for the fourth consecutive session on Thursday. The downtick also marked the fifth day of a negative move in the previous six and was exclusively sponsored by sustained selling surrounding the US dollar.

In fact, the USD Index tumbled to fresh multi-year lows amid the prevalent risk-on environment and the likelihood of additional US financial aid. Apart from this, hopes for a strong global recovery in 2021 and the regulatory approval of AstraZeneca/Oxford COVID-19 vaccine remained supportive of the upbeat market mood.

Meanwhile, a subdued action around crude oil prices did little to influence the commodity-linked currency – the loonie – or provide any impetus to the USD/CAD pair. The imposition of strict lockdown measures in the UK tempered the enthusiasm and forced oil prices to consolidate the recent gains to multi-month tops.

Nevertheless, the price action seems to suggest that the recent bounce from the lowest level since April 2018 might have already run out of the steam. This, in turn, might have already set the stage for a further depreciating move for the USD/CAD pair. That said, year-end thin liquidity might help limit the downside.

Market participants now look forward to the US economic docket, which highlights the only release of the usual Initial Weekly Jobless Claims. This, along with the broader market risk sentiment, could influence the USD price dynamics and produce some trading opportunities around the USD/CAD pair on the last day of the year.

Technical levels to watch