USD/CAD clings to modest gains above mid-1.3100s, lacks follow-through

• USD/CAD gained some positive traction on Thursday and recovered a part of the overnight fall.
• A fresh leg down in oil prices undermined the loonie and remained supportive of the uptick.
• The prevalent USD selling bias kept a lid on any strong gains ahead of BoC Mecklem’s speech.

The USD/CAD pair edged higher during the early European session and refreshed daily tops, around the 1.3170 region in the last hour, albeit lacked any strong follow-through.

Following an early dip to the 1.3130 region, the pair managed to regain some positive traction and recovered a part of the previous day's sharp intraday slide of around 115 pips from over three-week tops. The USD/CAD pair witnessed a dramatic intraday turnaround on Wednesday and was being pressured by a combination of factors.

A goodish bounce in crude oil prices provided an additional boost to the commodity-linked currency – the loonie. This coupled with the lack of any dovish signals from the Bank of Canada (BoC) provided an additional boost to the Canadian dollar and contributed to the overnight slide amid the emergence of some fresh US dollar selling.

The greenback remained depressed through the first half of the trading action on Thursday amid some follow-through buying around the shared currency. However, a fresh leg down in oil prices – now down around 1% for the day – assisted the USD/CAD pair to regain traction. The uptick lacked bullish conviction and warrant some caution before placing fresh bets.

Thursday's key focus will remain on the much-awaited European Central Bank monetary policy decision. Apart from this, the release of the US Initial Weekly Jobless Claims will influence the USD price dynamics and produce some short-term trading opportunities. Traders will further take cues from a scheduled speech by the BoC Governor Tiff Macklem, later during the US session.

Technical levels to watch