USD/CAD remains on track to close in red near 1.2800 despite USD strength

• USD seems to have settled around 1.2800 in the American session.
• Surging crude oil prices helped CAD outperform its peers on Tuesday.
• US Dollar Index rose to fresh two-month highs above 91.20.

The USD/CAD pair rose to a fresh daily high of 1.2870 in the early trading hours of the American session but made a sharp U-turn with surging crude oil prices providing a boost to the CAD. As of writing, the pair was down 0.33% on a daily basis at 1.2810.

WTI jumps to yearly highs on Tuesday

Renewed hopes for a steady recovery in energy oil demand amid US stimulus hopes and the ongoing coronavirus vaccinations triggered a rally in crude oil prices. The barrel of West Texas Intermediate touched its highest level in more than a year at $55.23 and was last seen rising 2.4% on the day at $54.80.

On the other hand, supported by rising US Treasury bond yields, the US Dollar Index advanced to a fresh two-month top of 91.28 on Tuesday and limited USD/CAD’s downside.

Earlier in the day, the data from the US revealed that the ISM-NY Business Conditions Index in January fell to 51.2 from 61.3 in December. On a positive note, the IBD/TIPP Economic Optimism in February improved to 51.9 and beat the market expectation of 51.

There won’t be any significant macroeconomic data releases from Canada on Wednesday. The ADP Employment Change and ISM Services PMI data from the US will be looked upon for fresh impetus. 

Technical levels to watch for