USD/CAD clings to gains near 1.2700 amid modest USD strength/retreating oil prices

A combination of factors assisted the USD/CAD pair to catch fresh bids on Tuesday and recover a part of the overnight losses back closer to the 1.2450 support zone. Crudeprices pulled away from the seven-year high touched last Friday and undermined the commodity-linked loonie. Apart from this, modest US dollar strength acted as a tailwind for the major.

Expectations that the revival of the 2015 international nuclear agreement could return more than 1 million barrels per day of Iranian oil – equating to more than 1% of global supply – in the markets. This, in turn, prompted traders to lighten their bullish bets ahead of the indirect talks between theOn the other hand, the greenback drew some support from a fresh leg up in the US Treasury bond yields, bolstered by speculations for a faster policy tightening by the.

This, in turn, pushed the yield on the benchmark 10-year US government bond well within the striking distance of the 2.0% threshold. Adding to this, the 2-year and 5-year notes – which are highly sensitive to rate hike expectations – held steady near the highest level since February 2020 and July 2019, respectively, and underpinned the greenback.

Hence, the market focus will remain glued to the release of the US consumer inflation figures on Thursday. The US CPI report will determine the Fed's near-term policy outlook and help determine the next leg of a directional move for the USD/CAD pair. In the meantime, traders might prefer to wait on the sidelines and refrain from placing aggressive bets.

Moreover, hopes that global supply would remain tight amid the post-pandemic recovery in fuel demand, along with the conflict between Russia and the West over Ukraine should limit losses for oil prices. This, in turn, should lend some support to the Canadian dollar and further contribute to capping

Source: Digital Coin News (digitalcoinnews.net)

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