- Sustained buying around the USD continues to lend some support to USD / CAD on Tuesday.
- The rally in crude prices could prop up the CAD and limit the pair’s gains.
- The overbought RSI on the daily chart also warrants some caution for aggressive bulls.
The pair USD / CAD maintains its intraday gains during the European session on Tuesday, trading near daily highs around the 1.2780-85 region.
Following the modest pullback the day before from the highest level since February 5, the USD / CAD pair has captured some new buying on Tuesday and seen supported by sustained interest in buying the US dollar. The crescents market fears that the fast-spreading delta variant of the coronavirus would hurt the economic recovery global have continued to act as a tailwind for the safe haven USD.
Apart of this, a modest rebound in Treasury yields The US has been seen as another factor that has offered some additional support to the USD. Meanwhile, a solid bounce in US equity futures, along with decreased odds of impending Fed action in the near future, could prevent USD bulls from opening aggressive positions and limit USD / CAD gains.
Apart of this, a good rally in crude prices could prop up the CAD, a currency linked to commodity prices, and continue to help limit the rise in the USD / CAD pair amid an overbought RSI on the daily chart. However, new COVID-19 outbreaks involving the delta variant have raised concerns about the short-term outlook for fuel demand and could limit the rise in black gold.
The fundamental backdrop favors the bulls and supports prospects for an extension of the recent strong move seen in the past two weeks. That said, it will remain prudent to wait for some near-term consolidation before positioning for the next move for the pair amid the absence of relevant economic releases on Tuesday, either from the United States or Canada.