USD/CAD remains depressed around 1.2825 area, over one-week low amid weaker USD

The USD/CAD pair remained on the defensive through the early European session and was last seen trading around the 1.2825-1.2820 region, just a few pips above a nearly two-week low.

The pair extended last week's retracement slide from the 1.3075 region, or its highest level since November 2020 and edged lower for the third successive day on Tuesday. The corrective decline was sponsored by the ongoing US dollar profit-taking slide from a two-decade high touched last Friday.

Given that the markets have fully priced in at least a 50 bps Fed rate hike move at the next two policy meetings, traders seem inclined to lighten their USD bullish bets. Apart from this, signs of stability in the financial markets turned out to be another factor that undermined the safe-haven greenback.

Conversely, the commodity-linked loonie drew support from the recent rally in oil prices, bolstered by the European Union’s impending ban on Russian crude imports. That said, softening global growth has raised concerns about faltering fuel demand and acted as a headwind for the black liquid.

Market participants, however, seemed reluctant and preferred to wait for Fed Chair Jerome Powell's appearance later this Tuesday. Powell's remarks will be looked upon for clues about the possibility of a 75 bps rate hike in June, which will play a key role in driving the near-term USD demand.

In the meantime, traders on Tuesday will take cues from the US economic docket - featuring the release of the US monthly Retail Sales - for some impetus during the early North American session. Apart from this, oil price dynamics should produce meaningful trading opportunities around the USD/CAD pair.

Technical levels to watch