USD/CAD rallies to multi-day tops, further beyond 1.4200 mark

The USD/CAD pair finally broke out of its daily trading range and climbed to multi-day tops, further beyond the 1.4200 mark during the early European session.

The pair added to the previous day's strong gains and gained some follow-through traction for the second consecutive session on Tuesday amid the prevailing buying interest surrounding the US dollar.

A goodish pickup in the US Treasury bond yields – supported by a further improvement in the global risk sentiment – underpinned the USD demand and seemed to be a key factor driving the pair higher.

Against the backdrop of the Fed's unlimited QE and a massive $2.2 trillion US economic stimulus package, a strong rebound in China's manufacturing activity in March boosted investors’ confidence on Tuesday.

The risk-on mood allowed crude oil prices to stage a solid recovery from 18-year lows, albeit did little to lend any support to the commodity-linked currency – the loonie or stall the pair's intraday positive move.

It will now be interesting to see if the pair is able to capitalize on the move or traders opt to lighten their bullish positions ahead of Tuesday's important macro releases, both from the US and Canada.

Tuesday's economic docket highlights the release of the monthly Canadian GDP data for January and the Conference Board's Consumer Confidence Index from the US, which might provide a fresh impetus.

Technical levels to watch