- USD/CAD edged higher for the second straight session and was supported by a combination of factors.
- Sliding crude oil prices undermined the loonie and remained supportive amid a modest USD strength.
The USD/CAD pair traded with a mild positive bias through the early European session and climbed to one-week tops, around mid-1.2300s in the last hour.
A combination of factors assisted the USD/CAD pair to build on the previous day's positive move and gain traction for the second consecutive session on Tuesday. A softer tone surrounding crude oil prices undermined demand for the commodity-linked loonie. Apart from this, a modest US dollar strength extended some additional support to the major.
Oil prices extended the previous day's retracement slide from the highest level since October 2018 and remained depressed amid worries about the fast-spreading Delta variant of COVID-19. Investors also seemed inclined to lighten their bullish bets around the black gold and turned cautious ahead of the OPEC+ meeting later this week.
On the other hand, the USD was supported by growing speculations that the Fed will tighten its monetary policy earlier if price pressures continue to intensify. This, along with an uptick in the US Treasury bond yields and the prevalent cautious mood around the equity markets, further acted as a tailwind for the greenback.
Apart from this, the uptick could be attributed to some technical buying above the 1.2340 horizontal resistance. That said, the lack of any strong follow-through momentum warrants some caution for bullish traders. Investors might also prefer to wait on the sidelines ahead of Friday's release of the closely watched US jobs report (NFP).
In the meantime, traders on Tuesday will take cues from the release of the Conference Board's US Consumer Confidence Index, due later during the early North American session. 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 provide some impetus to the USD/CAD pair.
