The USD/CAD pair gained traction during the first half of the NA session and extended its gains above the 1.22 handle to reach a fresh daily top 1.2245. As of writing, the pair was trading at 1.2242, gaining 0.42% on the day.
A recent USD rally seems to be the primary driver of the pair's upsurge. The US Dollar Index, which spent the majority of the day a little above mid-91s, received an additional boost from the rising US Treasury-bond yields and is now moving closer to the 92 handle. As of writing, the index was at 91.86, gaining 0.23% on the day.
An improved market sentiment on the first trading day of the week is hurting the demand for traditional safe-havens such as the US T-bonds, pushing their yields higher. At the moment, the yield of the 10-year reference is up 1.15% at 2.227%. The strong risk appetite is also reflected upon the major equity indexes in the U.S. with the Dow Jones Industrial Average and the S&P 500 gaining 0.4% and 0.3% respectively.
On the other hand, after inching higher to its best level since late May at $50.84 during the late Asian session, the barrel of West Texas Intermediate erased its earnings and is now testing the $50 handle, making it difficult for the commodity-linked loonie to show resilience against the buck.
Later in the session, the Bank of Canada's Deputy Governor Timothy Lane will be delivering his speech titled "How Canada’s International Trade Is Changing with the Times" before the Saskatoon Regional Economic Development Authority
Technical outlook
The RSI indicator on the H4 chart is now moving higher towards the 70 mark, suggesting that the bullish momentum is persistent in the near-term. The pair could face the initial hurdle at 1.2300 (psychological level/20-DMA) ahead of 1.2410 (Sep. 6 high) and 1.2475 (50-DMA). On the downside, supports could be seen at 1.2165 (10-DMA), 1.2080 (Apr. 27, 2015, low) and 1.2000 (psychological level).
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