- USD/CAD saw some selling for the second day in a row on Tuesday.
- Rising oil prices and upbeat Canadian data supported the loonie and put pressure on it.
- The rally in US bond yields acted as a tailwind for the dollar and helped limit deeper losses.
The pair USD/CAD managed to find good support near 1.2900 on Tuesday and trimmed some of its heavy intraday losses. The pair hovered around the 1.2935-1.2940 area during the early hours of the North American session, down nearly 0.30% on the day.
Concerns over tight global supplies allowed crude oil prices to regain positive traction and pull back from one-month lows, which in turn underpinned the commodity-linked loonie. The loonie received additional support from upbeat domestic data, which showed retail sales posted growth of 0.9% in April, versus the previous month’s upwardly revised reading of 0.2%. Excluding autos, core retail sales rose 1.3% during the reported month, versus 0.6% expected.
That said, the appearance of some US dollar buying offered some support to the USD/CAD pair. Expectations that the Federal Reserve will maintain its aggressive tightening policy, coupled with the risk boost, pushed up US Treasury yields. This, in turn, acted as a tailwind for the dollar and helped limit deeper losses from the major. For the time being, spot prices appear to have halted the recent pullback from the yearly high around the 1.3080 area reached last Friday.
However, it remains to be seen whether the USD/CAD pair is capable of attracting further buying as attention now turns to the latest consumer inflation figures from Canada due out on Wednesday. Investors will continue to watch Fed Chairman Jerome Powell’s two-day testimony in Congress before making directional bets. Meanwhile, broader risk sentiment and US bond yields could weigh on the dollar, which, along with oil price dynamics, could give the pair some momentum.
Technical levels
Source: Fx Street
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