• USD/CAD gained some positive traction on Wednesday amid the emergence of fresh USD buying.
  • A fresh leg up in the US bond yields and a softer risk tone revived demand for the safe-haven USD.
  • Bullish crude oil prices underpinned the loonie and kept a lid on any meaningful gains for the pair.

The USD/CAD pair attracted some buying near the 1.2425 region on Wednesday and reversed a part of the previous day’s slide to its lowest level since April 21. The pair held on to its modest intraday gains through the early European session, albeit seemed to struggle to capitalize on the intraday positive move beyond mid-1.2500s.

The US dollar was back in demand amid a goodish pickup in the US Treasury bond yields and turned out to be a key factor that offered some support to the USD/CAD pair. In fact, the yield on the benchmark 10-year US government bond moved back above 3.0%, closer to a nearly four-week high touched earlier this week amid worries about persistent inflation.

Investors remain concerned that global supply chain disruption caused by the Russia-Ukraine war would continue to push consumer prices higher. This might force the US central bank to tighten its monetary policy at a faster pace. Hence, the market focus will remain glued to the latest US consumer inflation figures, scheduled for release on Friday.

Meanwhile, doubts that central banks can hike interest rates to curb inflation without impacting economic growth kept a lid on the overnight optimistic move in the markets. This was seen as another factor that benefitted the safe-haven buck, though bullish crude oil prices underpinned the commodity-linked loonie and capped the USD/CAD pair.

There isn’t any major market-moving economic data due for release on Wednesday, either from the US or Canada. Hence, the US bond yields, along with the broader market risk sentiment, will drive the USD demand and provide some impetus to the USD/CAD pair. Apart from this, traders will take cues from oil price dynamics to grab short-term opportunities.

Technical levels to watch

This article was originally published by Fxstreet.com.Read the original article here.

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