USD/CAD holds steady near session tops, remains below 1.2500 mark
- A modest pullback in oil prices undermined the loonie and assisted USD/CAD to gain traction.
- Retreating US bond yields kept the USD bulls on the defensive and might cap any further gains.
- Investors look forward to US Retail Sales for some impetus ahead of the FOMC policy meeting.
The USD/CAD pair traded with a mild positive bias heading into the European session and was last seen hovering near the top end of its daily range, around the 1.2485 region.
The pair caught some fresh bids on Tuesday and might now be looking to stage a meaningful recovery from over three-year lows, around the 1.2440 area touched in the previous session. A modest pullback in crude oil prices undermined the commodity-linked loonie and was seen as a key factor lending some support to the USD/CAD pair.
Oil prices edged lower for the third straight day on Tuesday amid concerns that suspension of the Oxford/AstraZeneca coronavirus vaccine could hurt the fuel demand recovery. Spain, Germany, France and Italy became the latest European countries to temporarily halt the rollout of the COVID-19 vaccine after reports of possible serious side effects.
On the other hand, a cautious mood around the equity markets extended some support to the safe-haven US dollar and further benefitted the USD/CAD pair. That said, retreating US Treasury bond yields held the USD bulls from placing aggressive bets, which, in turn, might keep a lid on any strong gains for the USD/CAD pair, at least for now.
In fact, the yield on the benchmark 10-year US government bond retreated from over one-year tops amid expectations that the Fed could take action to curb any further rise in long-term borrowing cost. Hence, the key focus will remain on the outcome of a two-day FOMC meeting, scheduled to be announced during the US session on Wednesday.
In the meantime, market participants will look forward to the release of the US monthly Retail Sales figures for some impetus. This, along with the US bond yields and the broader market risk sentiment, might influence the USD. Apart from this, oil price dynamics will further contribute to produce some trading opportunities around the USD/CAD pair.
Technical levels to watch