USD/CAD eases from tops, up little around mid-1.4000s

• A combination of factors assisted USD/CAD to gain some traction on Tuesday.
• A slump in oil prices undermined the loonie and weighed on investors’ sentiment.
• The USD benefitted from the prevalent cautious mood and remained supportive.

The USD/CAD pair edged higher on Tuesday and climbed to fresh session tops, around the 1.4065-70 region in the last hour, albeit lacked any strong follow-through.

The pair continued showing some resilience near the key 1.40 psychological mark and managed to regain some positive traction during the Asian session on Tuesday. The uptick was supported by a combination of factors, including a fresh rout in crude oil prices and a goodish pickup in the US dollar demand.

Oil prices dived again on Tuesday amid persistent worries about oversupply and a lack of storage space. This comes after the largest US exchange-traded fund said it would sell all its front-month crude contracts to avoid further losses, which undermined the commodity-linked currency – the loonie.

Meanwhile, a renewed decline in oil prices overshadowed the latest optimism over the easing of coronavirus-related restrictions globally and a push to accelerate the gradual re-opening of the economies. This, in turn, weighed on investors' sentiment and led to the prevalent cautious mood.

The greenback regained its status as the global reserve currency amid concerns about the economic fallout from the coronavirus pandemic. This coupled with a diminishing demand for perceived riskier assets provided an additional lift to the buck and remained supportive of the pair's modest uptick.

The pair, however, continued with its struggled to attract any strong follow-through buying and remained in a three-day-old trading range, warranting some caution before placing any fresh bullish bets. Conversely, a sustained break below the 1.40 mark should pave the way for a further slide.

Later during the early North-American session, the US economic docket – highlighting the release of the Conference Board's Consumer Confidence Index – will be looked upon for some short-term trading opportunities.

Technical levels to watch