USD/CAD refreshes daily low amid weaker USD, retreating oil prices to limit losses

The USD/CAD pair extended its retracement slide from the one-week high and dropped to a fresh daily low, around the 1.2725-1.2720 area during the early North American session.

The pair continued with its struggle to make it through the 1.2770-1.2780 supply zone and witnessed some intraday selling amid modest US dollar weakness. A Kremlin spokesperson said that Russia is still open to diplomacy and has an interest in that, which helped ease market concerns over the worsening situation in Ukraine. This, in turn, led to a solid recovery in the equity markets and drove flows away from traditional safe-haven assets, including the greenback.

That said, a combination of factors could limit any meaningful slide for the USD. Despite the latest development, fears about a further escalation in tensions between Russia and the West over Ukraine should keep a lid on any optimistic move in the markets. Apart from this, a sharp rally in the US Treasury bond yields should act as a tailwind for the buck and the USD/CAD pair amid retreating crude oil prices, which tend to undermine the commodity-linked loonie.

Nevertheless, the USD/CAD pair, for now, seems to have snapped three successive days of the losing streak and remains at the mercy of the situation in Ukraine. In the meantime, traders on Tuesday might take cues from the release of the flash US PMI prints. Apart from this, the US bond yields would influence the USD demand. This, along with oil price dynamics should provide some impetus to the USD/CAD pair and allow traders to grab some short-term opportunities.

Technical levels to watch