Spot prices struggled to capitalize on the modest intraday gains and started retreating from the 1.3035 region, or the highest level since November 2020 touched earlier this Tuesday. The bearish move lacked any obvious fundamental catalyst and could be solely attributed to some profit-taking following the recent strong gains of over 300 pips recorded over the past three days or so.
The pullback, however, remains cushioned amid a weaker tone around crude oil prices, which tend to undermine the commodity-linked loonie. Oil prices added to the previous day’s steep declines amid the bleak outlook for global fuel demand – led by growing recession risks and strict coronavirus-induced lockdowns in top oil importer – China.
Additionally, a delay in the approval of the European Union’s proposed phased embargo on Russian oil – amid requests from Eastern European members for exemptions and concessions – also undermined the commodity. Reports indicate that a new version is currently being drafted and could drop a ban on EU tankers carrying Russian oil after pressure from Greece, Cyprus, and Malta.
In the meantime, the USD remains at the mercy of the US bond yields and the broader market risk sentiment amid absent relevant market moving economic releases. Apart from this, oil price dynamics should provide some impetus to the USD/CAD pair and allow traders to grab some short-term opportunities.
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