- USD / CAD fell into negative territory for the second consecutive session on Wednesday.
- A strong recovery in crude oil prices sustained the loonie and put downward pressure.
- Rising US bond yields should act as a tailwind for the USD and help limit deeper losses.
The pair USD / CAD it extended its intraday retracement decline and fell to fresh daily lows, below 1.2650 during the early days of the American session.
The pair struggled to capitalize on its modest intraday gains, instead encountering fresh supply near the 1.2730 region and down for the second straight session on Wednesday. A strong follow-up recovery in crude oil prices, now up 2% on the day, sustained the Canadian dollar pegged to commodities and sparked some selling around the USD / CAD pair.
As investors looked beyond Tuesday’s API report, which showed a surprising rise in US crude inventories, a further improvement in global risk sentiment benefited black gold. The flow of risk prevented traders from placing further bullish bets around the safe-haven US dollar, which was seen as another factor contributing to the USD / CAD decline.
However, new COVID-19 outbreaks involving the Delta variant have raised concerns about the short-term fuel demand outlook and could limit the rise in black gold. Aside from this, rising U.S. Treasury yields acted as a tailwind for the USD, which, in turn, should help limit deeper losses, rather than help the dollar. USD / CAD pair to attract some falling buying.
There is no major market-moving economic data released on Wednesday, be it from the US or Canada. Therefore, the focus will turn to the official report on US crude inventories from the Energy Information Administration later in the US session. Traders could follow the signs of price dynamics. from the USD to seize some short-term opportunities around the USD / CAD pair.