USD/CAD Falls Amid Quiet Holiday Market Session, Crude Oil Rally

The Canadian dollar is adding to its 2020 gain against its US peer on Tuesday, driven by rising crude oil prices and a greater risk appetite in the broader financial markets. The loonie has stabilized for the last several months, with much of its rally occurring since September. Could the loonie ignite a significant rally next year?

So far in the holiday-shortened trading week, volumes have been minimal, with many traders taking time off and investors refraining from making big speculative bets. This might be bad news for the greenback but a positive development for other currencies.
The loonie found support surging energy markets. February West Texas Intermediate (WTI) crude futures advanced $0.53, or 1.11%, to $48.15 per barrel on the New York Mercantile Exchange. February natural gas futures tacked on $0.102, or 4.43%, to $2.407 per million British thermal units (btu).
Canada maintains a current account deficit, so exports remain a critical component of the Canadian economy. Oil and gas are the country’s top exports, meaning that any substantial change in prices — high or low — can affect the loonie and the broader economy.
The bond market has been mixed during the holiday market session, with the benchmark 10-year bond dipping 0.001% to 0.719%. The one-year note was flat at 0.175%, while the 30-year bond fell 0.009% to 1.256%.
Investors have been fleeing the greenback in the home stretch of 2020. The US Dollar Index (DXY), which gauges the buck against a basket of currencies, shed 0.39% to 89.99, from an opening of 90.34, on Tuesday. The index has plummeted close to 7% year-to-date as investors return to the equities arena and add to their positions in riskier plays.
The movement in the DXY is crucial for the loonie because a considerable portion of its direction is determined by sentiment in the greenback.
It will be quiet on the data front until next week when manufacturing, producer prices, trade, and employment data will be released.
The USD/CAD currency pair tumbled 0.4% to 1.2795, from an opening of 1.2848, at 16:00 GMT on Tuesday. The EUR/CAD slipped 0.14% to 1.5671, from an opening of 1.5699.
If you have any questions, comments, or opinions regarding the Canadian Dollar, feel free to post them using the commentary form below.

Original from: www.earnforex.com