USD/CAD off 2-week lows, still on the defensive below mid-1.3500s

• USD/CAD remained depressed amid sustained selling around the USD.
• The upbeat market mood dented demand for the safe-haven greenback.
• Concerns about rising coronavirus cases helped limit any further losses.

The USD/CAD pair quickly reversed an early European session dip to near two-week lows and was last seen trading in the neutral territory, just below mid-1.3500s.

The pair edged lower through the early part of trading action on the first day of the week and was being pressured by the emergence of some renewed selling around the US dollar. The incoming positive economic data continued fueling optimism about a sharp V-shaped global economic recovery. This, in turn, remained supportive of the upbeat market mood and weighed on the safe-haven greenback.

However, worries that a continuous surge in coronavirus cases could put the brakes on economic activity once again held investors from taking excessive risk. Apart from this, concerns that renewed lockdown measures could curb oil demand undermined the commodity-linked currency – the loonie and helped limit any deeper losses for the USD/CAD pair, at least for the time being.

The pair has now managed to rebound around 25 pips from daily lows, though any subsequent move up is likely to confront stiff resistance near the 1.3600 mark. This makes it prudent to wait for some strong follow-through buying before traders start positioning for any further near-term appreciating move.

Market participants now look forward to the US economic docket, highlighting the release of ISM Non-Manufacturing PMI. The data might influence the USD price dynamics, which coupled with sentiment surrounding the oil markets might produce some meaningful trading opportunities.

Technical levels to watch