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  • A modest USD uptick assisted USD/CAD to gain some positive traction on Tuesday.
  • A fresh leg down in the US bond yields held the USD bulls from placing fresh bets.
  • Bullish oil prices underpinned the loonie and collaborated towards capping the pair.

The USD/CAD pair added to its gains and refreshed daily tops, around mid-1.3000s during the early North American session, albeit quickly retreated few pips thereafter. The pair was last seen trading around the 1.3015-20 region, nearly unchanged for the day.

Following a brief consolidation through the first half of the trading action on Tuesday, the pair managed to regain some traction and built on the overnight rebound from nine-month lows. The uptick was supported by the emergence of some buying around the US dollar. However, a positive tone around crude oil prices underpinned the commodity-linked currency – the loonie – and capped the upside for the USD/CAD pair.

Despite a promising development in late-stage COVID-19 vaccine, investors remained sceptic about the efficacy and the length of immunity provided. The nervousness drove some haven flows towards the greenback, which, in turn, was seen as one of the key factors lending some support to the USD/CAD pair. That said, a fresh leg down in the US Treasury bond yields held the USD bulls from placing aggressive bets.

Meanwhile, Pfizer’s COVID-19 vaccine announcement on Monday raised hopes for a swift recovery in the global fuel demand. This was evident from some follow-through positive move in crude oil prices, which further collaborated towards capping gains for the USD/CAD pair. This makes it prudent to wait for some strong follow-through buying before confirming that the pair has bottomed out and positioning for any further appreciating move.

There isn’t any major market-moving economic data due for release on Monday, either from the US or Canada, leaving the USD/CAD pair at the mercy of the USD/oil price dynamics. Apart from this, speeches by FOMC members will also be looked upon for some meaningful trading opportunities.

Technical levels to watch