USD/CAD struggled to capitalize on its modest intraday gains
The USD/CAD pair recovered a few pips from the early European session low and was last seen trading with modest intraday gains, just above the 1.2800 round-figure mark. A combination of factors failed to assist the USD/CAD pair to capitalize on its early uptick to an over one-week high and led to a subdued/range-bound price move on Tuesday. Crude oil prices regained positive traction and recovered a major part of the overnight retracement slide. This, in turn, underpinned the commodity-linked loonie and acted as a headwind for the USD/CAD pair.
On the other hand, the US dollar struggled to preserve its modest intraday gains and was seen consolidating near a one-week high. This was seen as another factor that kept a lid on any meaningful upside for the USD/CAD pair. The downside, however, remains cushioned amid uncertainty over the economic risks stemming from the spread of the Omicron variant and hawkish Fed expectations.
Worries that the imposition of fresh COVID-19 restrictions in Europe and Asia could dent fuel demand could cap gains for crude oil prices. Apart from this, growing acceptance that the Fed would tighten its monetary policy sooner than expected should limit any meaningful USD downside. This, in turn, should hold back traders from placing any bearish bets on the USD/CAD pair. Investors might also prefer to wait on the sidelines heading into the key central bank event risk like the highly-anticipated FOMC monetary policy decision on Wednesday. Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/CAD pair's recent move up from the 1.2600 neighbourhood has run out of steam.
Worries that the imposition of fresh COVID-19 restrictions in Europe and Asia could dent fuel demand could cap gains for crude oil prices. Apart from this, growing acceptance that the Fed would tighten its monetary policy sooner than expected should limit any meaningful USD downside. This, in turn, should hold back traders from placing any bearish bets on the USD/CAD pair. Investors might also prefer to wait on the sidelines heading into the key central bank event risk like the highly-anticipated FOMC monetary policy decision on Wednesday. Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/CAD pair's recent move up from the 1.2600 neighbourhood has run out of steam.