USD/CAD holds steady above 1.3100 mark amid stronger USD, sliding oil prices

• A combination of factors assisted USD/CAD to gain traction for the second straight day.
• The USD traded higher and was supported by heavy selling in the European currencies.
• The ongoing corrective slide in oil prices undermined the loonie and remained supportive.

The USD/CAD pair traded with a mild positive bias through the early European session and was last seen hovering near the top end of its daily range, above the 1.3100 mark.

The pair built on the previous day's goodish positive move and gained some follow-through traction for the second consecutive session on Tuesday. The uptick was sponsored by a strong pickup in the US dollar demand and a sharp fall in crude oil prices, which tend to undermine the commodity-linked currency – the loonie.

As investors looked past Friday's mixed US monthly jobs report, the USD resumed its advance since the beginning of this week and was being supported by some heavy selling around the European currencies. Adding to this, concerns about rising US-China tensions drove some haven flows towards the greenback and remained supportive.

On the other hand, the Canadian dollar remained depressed on the back of the ongoing corrective slide in oil prices, now down around 2.5% for the day. The ever-increasing coronavirus cases in the US raised doubts over demand growth and dragged oil prices back below the $39.00/barrel mark, or two-month lows on Tuesday.

Despite the positive factors, bulls seemed struggled to push the USD/CAD pair beyond a two-month-old descending trend-channel. This makes it prudent to wait for some strong follow-through buying before traders start positioning for any further gains as the focus shifts to the latest BoC monetary policy decision on Wednesday.

In the meantime, the USD/CAD pair seems more likely to remain confined in a range amid absent relevant market-moving economic releases, either from the US or Canada.

Technical levels to watch