• Bullish oil prices underpinned the loonie and kept USD/CAD on the defensive on Tuesday.
  • Surging US bond yields acted as a tailwind for the USD and extended support to the major.
  • The mixed fundamental backdrop warrants some caution before placing directional bets.

The USD/CAD pair remained on the defensive through the early European session and was last seen trading around the key 1.2500 psychological mark.

The pair added to the overnight modest losses and edged lower for the second successive day on Tuesday amid bullish crude oil prices, which tend to underpin the commodity-linked loonie. In fact, the black gold rallied to a more than seven-year high in the wake of rising geopolitical tensions in the Middle East.

In fact, Yemen's Houthi group claimed to have launched a drone strike on the United Arab Emirates’ capital city of Abu Dhabi, killing three people. This fueled worries about possible supply disruptions from the third-biggest OPEC producer and added to the bullish sentiment amid shrinking global oil inventories.

The downside, however, remains cushioned, at least for now, on the back of a broad-based US dollar strength, bolstered by surging US Treasury bond yields. The yield on the benchmark 10-year US government bond shot to the highest level since January 2022 amid bets that the Fed would start raising rates in March 2022.

The mixed fundamental backdrop warrants some caution before positioning for any firm near-term direction ahead of the upcoming FOMC policy meeting on January 25-26. In the meantime, traders on Tuesday will take cues from the release of the Empire State Manufacturing Index and oil price dynamics for some short-term opportunities.

Technical levels to watch

USD/CAD

Overview
Today last price 1.2502
Today Daily Change -0.0021
Today Daily Change % -0.17
Today daily open 1.2523
 
Trends
Daily SMA20 1.2705
Daily SMA50 1.2704
Daily SMA100 1.2624
Daily SMA200 1.2502
 
Levels
Previous Daily High 1.2558
Previous Daily Low 1.25
Previous Weekly High 1.2698
Previous Weekly Low 1.2454
Previous Monthly High 1.2964
Previous Monthly Low 1.2608
Daily Fibonacci 38.2% 1.2522
Daily Fibonacci 61.8% 1.2536
Daily Pivot Point S1 1.2496
Daily Pivot Point S2 1.247
Daily Pivot Point S3 1.2439
Daily Pivot Point R1 1.2554
Daily Pivot Point R2 1.2585
Daily Pivot Point R3 1.2612

 

 

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