USD/CAD struggles to make it through 1.3400, remains below multi-week high set on Tuesday

• USD/CAD attracts some dip-buying on Wednesday, albeit lacks bullish conviction.
• Elevated US bond yields act as a tailwind for the USD and lend support to the pair.
• An uptick in Oil prices underpins the Loonie and seems to cap gains for the major.
• Traders also seem reluctant and prefer to wait for the US CPI report on Thursday.

The USD/CAD pair edges higher to the 1.3400 neighbourhood heading into the European session on Wednesday, albeit remains below a multi-week high touched the previous day.

The US Dollar (USD) remains supported by elevated US Treasury bond yields and trades well within the striking distance of a three-week peak set last Friday. In fact, the yield in the benchmark 10-year US government bond holds steady above the 4.0% threshold amid diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed). This, in turn, is seen acting as a tailwind for the Greenback and lending support to the USD/CAD pair.

The uptick, however, lacks bullish conviction in the wake of some follow-through buying around Crude Oil prices. Supply worries stemming from escalating geopolitical tensions in the Red Sea, along with the suspension of production at Libya's largest oil field on Sunday and another outsized draw in US crude inventories, lend some support to Crude Oil prices. This could underpin the commodity-linked Loonie and should cap the USD/CAD pair.

Traders might also prefer to move to the sidelines and wait for the release of the latest consumer inflation figures from the US on Thursday. The crucial CPI report might provide some cues about the Fed's future policy actions amid the uncertainty over the timing of the first interest rate cut. This, in turn, will play a key role in influencing the USD price dynamics and determining the next leg of a directional move for the USD/CAD pair.

In the meantime, the US bond yields will continue to drive the USD demand in the absence of any relevant market-moving macro releases, either from the US or Canada on Wednesday. Apart from this, traders will take cues from Oil price dynamics to grab short-term opportunities. Nevertheless, the aforementioned mixed fundamental backdrop suggests that the USD/CAD pair is likely to extend its range-bound price action ahead of the key US data risk.

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