USD/CAD pares intraday gains, up little around 1.2600 mark
- USD/CAD gained some positive traction on Tuesday, though lacked strong follow-through.
- Bullish oil prices continued underpinning the loonie and acted as a headwind for the pair.
- A goodish pickup in the USD demand extended support and limited any meaningful slide.
The USD/CAD pair surrendered a major part of its intraday gains and was last seen trading around the 1.2600 mark, up over 0.10% for the day.
The pair struggled to capitalize on its early positive move and witnessed some selling near the 1.2630 area amid bullish crude oil prices, which tend to underpin the commodity-linked loonie. Oil prices remained well supported near seven-year tops after OPEC and its allies – collectively known as OPEC+ – decided on Monday to keep a cap on crude supplies.
OPEC+ was concerned that a fourth global wave of COVID-19 infections could hit the demand recovery and shrugged off the international calls to boost output. This, to some extent, was offset by a goodish pickup in the US dollar strength, which extended some support to the USD/CAD pair and helped limit any meaningful slide, at least for the time being.
The USD continued drawing support from firming market expectations that the Fed would begin rolling back its massive pandemic-era stimulus. The markets also seem to have started pricing in the possibility of an interest rate hike in 2022. Apart from this, a modest uptick in the US Treasury bond yields might continue to act as a tailwind for the greenback.
That said, a solid rebound in the equity markets held traders from placing aggressive bullish bets around the safe-haven USD. The mixed fundamental backdrop warrants some caution before positioning for any firm near-term direction ahead of this week's release of the closely watched monthly jobs report from the US (NFP) and Canada, both due on Friday.
In the meantime, traders might take cues from Tuesday's release of the US ISM Services PMI. This, along with the US bond yields and a scheduled speech by Fed Governor Randal Quarles, will influence the USD. Apart from this, oil price dynamics would further assist traders to grab some short-term opportunities around the USD/CAD pair.
Technical levels to watch