The USD/CAD pair retreats from its highest level in two months amid a strong recovery in oil prices

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The USD/CAD pair retreats from its highest level in two months amid a strong recovery in oil prices

  • The USD/CAD pair failed to consolidate the momentum that crossed the 1.3000 mark.
  • The strong recovery in oil prices was the reason behind the Canadian dollar's rally and some pressure.
  • It appears that the rebound was not affected by the follow-up to the strength of the US dollar.

The USD/CAD pair finally broke lower from the Asian session consolidation phase and rebounded from daily lows, around the 1.3275-70 region in the last hour.

The pair struggled to extend its recent positive momentum beyond the 1.3300 level and saw a modest pullback during the early European session on Tuesday. The pair undermined part of the previous session's positive move to 2-month highs and was influenced by a nice recovery in oil prices.

A recovery stimulates oil prices to take profits

After last night's sharp sell-off to its lowest level in more than a year, oil prices saw a modest recovery on Tuesday amid improving global risk sentiment. Rising 2% now for the day, positive oil prices boosted the commodity-linked currency - the Canadian dollar and prompted some unwinding of long positions.

Meanwhile, the intraday pullback appeared to be largely unaffected by the prevailing US dollar buying, buoyed by the upbeat US manufacturing PMI released by the ISM on Monday. The dollar got an extra boost from the mood-based risk recovery in US Treasury yields, albeit doing little to provide any support.

It will now be interesting to see if the pair is able to attract any buying of the dips or if it continues its corrective decline amid the relevant market-moving economic data on Tuesday. Hence, it would be wise to wait for some follow-up on weakness before identifying any trading positions for further weakness.

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