USD/CAD refreshes session tops near 1.2730, lacks follow-through

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  • USD/CAD managed to attract some dip-buying near 1.2700 mark on Wednesday.
  • The ongoing pullback in the US bond yields held the USD bulls on the defensive.
  • Bullish oil prices should continue to underpin loonie and cap gains for the major.

The USD/CAD pair edged higher during the early European session and climbed to fresh session tops, around the 1.2725-30 region in the last hour.

The pair managed to find some support ahead of the weekly lows and for now, seems to have stalled this week’s sharp pullback from the 1.2835 region, though lacked any strong follow-through. A combination of factors might hold back investors from placing aggressive bullish bets and keep a lid on any meaningful upside for the USD/CAD pair.

Crude oil prolonged the recent strong bullish run and rose for the seventh consecutive session on Wednesday. The momentum was supported by Tuesday’s API data that showed a larger-than-expected drop in US inventories and pushed spot prices to the highest level since February. This, in turn, was seen underpinning the commodity-linked loonie.

On the other hand, the US dollar was weighed down by the ongoing pullback in the US Treasury bond yields and the underlying bullish sentiment in the global financial markets. In fact, the yield on the benchmark 10-year US government bond retreated further from multi-month tops touched on Tuesday and held the USD bulls on the defensive.

Meanwhile, the global risk sentiment remained well supported by hopes for a strong global economic recovery and expectations of a more aggressive US fiscal spending in 2021. Investors remained hopeful that President-elect Joe Biden would push for a multi-trillion stimulus package when he and his administration take office on January 20.

Market participants now look forward to the US economic docket, highlighting the release of the latest consumer inflation figures. The data, along with the broader market risk sentiment and the US bond yields, will influence the USD price dynamics. This, in turn, might assist traders to grab some short-term opportunities around the USD/CAD pair.

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