USD/CAD recovers early lost ground, turns neutral around 1.3770-75 region

• USD/CAD staged a modest intraday bounce from the lowest level since March 16.
• A pickup in the USD demand, sliding oil prices remained supportive of the uptick.

The USD/CAD pair has managed to rebound around 40 pips from daily swing lows and was last seen trading nearly unchanged for the day, comfortably above mid-1.3700s.

The pair added to the previous day's heavy losses and lost some additional ground through the early part of Wednesday's trading action. However, a combination of factors helped ease the intraday bearish pressure and assisted the pair to find some support near the 1.3725 region.

The US dollar was back in demand amid worsening US-China relations over the dragon nation's proposed new security law for Hong Kong. The US President Donald Trump promised a strong reaction by the end of the week and China has threatened to retaliate against any US actions.

Meanwhile, the USD bulls seemed rather unaffected by the prevalent risk-on environment, as depicted by some follow-through strength in the equity markets. The global risk sentiment remained well supported by the latest optimism over a potential COVID-19 vaccine.

This coupled with a sharp pullback of nearly 3% in crude oil prices undermined the commodity-linked currency – the loonie. This, in turn, and further contributed towards limiting the pair's early slide, rather led to a modest bounce from the lowest level since March 16.

There isn't any major market-moving economic data due for release from the US on Wednesday. Hence, the USD/oil price dynamics might continue to play a key role in influencing the pair’s momentum and produce some meaningful trading opportunities.

Technical levels to watch

USD/CAD