USD/CAD faces rejection near 1.3300 mark, retreats below mid-1.3200s

• USD/CAD witnessed some aggressive short-covering move from sub-1.3100 level.
• The US political uncertainty benefitted the safe-haven USD and remained supportive.
• A goodish rebound in oil prices underpinned the loonie and capped any further gains.

The USD/CAD pair faced rejection near the 1.3300 mark and quickly retreated around 50-60 pips from daily tops touched during the early European session.

Having shown some resilience below the 1.3100 mark, the pair witnessed some aggressive short-covering move on Wednesday and was supported by a strong pickup in the demand for the US dollar. The early results of the US election indicated a tighter than expected race for the White House.

Moreover, the possibility of the outcome being challenged in court drove investors back towards the USD and hedge their positions. This, in turn, was seen as a key factor that led to a strong intraday rally of around 200 pips and pushed the USD/CAD pair back closer to the 1.3300 mark.

However, a goodish rebound in crude oil prices underpinned the commodity-linked currency – the loonie – and led to some intraday pullback for the USD/CAD pair. That said, the uncertain US political situation might continue to benefit the safe-haven USD and attract some dip-buying.

Market participants now look forward to the US economic docket, highlighting the release of the ADP report on private-sector employment and the ISM Services PMI. The data, however, is more likely to be overshadowed by the US political developments and fail to provide any meaningful impetus.

Technical levels to watch