USD/CAD drops toward 1.2700 amid modest oil rebound
|- USD/CAD lost its traction after rising above 1.2800 on Tuesday.
- US Dollar Index consolidates daily gains around 93.00.
- Positive shift seen in risk sentiment is helping crude oil stage a rebound.
The USD/CAD pair extended its rally and advanced beyond 1.2800 for the first time in five months. With risk flows starting to dominate the financial markets in the second half of the day, however, the pair reversed its direction and was last seen losing 0.25% at 1.2715.
DXY rally loses steam as US stocks rebound
Earlier in the day, the broad-based USD strength allowed USD/CAD to remain bullish following Monday's upsurge. The US Dollar Index (DXY) reached its highest level since early April at 93.17 during the European trading hours and helped the pair push higher.
On the other hand, the barrel of West Texas Intermediate (WTI), which lost nearly 7% on Monday, struggled to erase its losses and made it difficult for the commodity-related loonie to show resilience against its American counterpart.
The decisive recovery witnessed in Wall Street's main indexes forced USD/CAD to edge lower in the American session as the safe-haven USD lost its attractiveness and WTI turned north. Currently, the S&P 500 is up 1.5% on the day and WTI is rising 0.67% at $67.
The only data from the US showed on Tuesday that Housing Starts increased by 6.3% on a monthly basis in June. Nevertheless, investors paid little to no attention to this report. There won't be any high-tier data releases featured in the North American economic docket on Wednesday and the risk perception is likely to continue to impact currency valuation.
Technical levels to watch for
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