- Sustained USD buying assisted USD/CAD to regain some positive traction on Tuesday.
- A modest uptick in oil prices underpinned the loonie and capped gains for the major.
- Canadian GDP figures did little to provide any impetus and passed largely unnoticed.
The USD/CAD pair held on to its modest gains, around the 1.2670-75 region through the early North American session and had a rather muted reaction to the Canadian GDP report.
The US dollar built on its recent strong positive move and remained well supported by the upbeat US economic outlook. This, in turn, was seen as a key factor that assisted the USD/CAD pair to regain some positive traction on Tuesday. However, a goodish rebound in crude oil prices underpinned the commodity-linked loonie and kept a lid on any further gains.
The USD/CAD pair moved little following the release of mixed Canadian GDP figures, which showed that the economy recorded a modest growth of 0.1% in December as against 0.3% expected. The disappointment, to some extent, was offset by better-than-expected quarterly print. In fact, the economy expanded by a 9.6% annualized pace during the October-December period vs. 7.5% expected.
Meanwhile, a softer tone around the equity markets might benefit the safe-haven greenback. Apart from this, expectations that the Fed will show greater tolerance to higher bond yields could further extend some support to the buck. This, in turn, supports prospects for additional gains for the USD/CAD pair, though a move beyond the 1.2700 mark is needed to confirm the bullish outlook.
With Tuesday’s macro data out of the way, traders might now take cues from crude oil price dynamics. Apart from this, the US bond yields will continue to play a key role in driving the USD and further contribute to produce some short-term trading opportunities around the USD/CAD pair.