USD/CAD slides to test weekly lows under 1.2565

• US dollar turns negative as risk sentiment improves.
• CAD is the top performer among commodity currencies.
• USD/CAD heads for the lowest close since April 20.

The USD/CAD is falling on Tuesday and recently hit a fresh daily low at 1.2539. A weaker US dollar pushed the pair further lower during the American session.

Resumes the decline?

A sudden improvement in risk sentiment boosted US stocks indices that turned positive in a few minutes. The Dow Jones is up 0.21% after rebounding 300 points. At the same time US yields extended the decline. The US 10-year yield fell to 2.96%, far from the recent high of 3.06%.

The combination of lower US yields and risk appetite weighed on the US dollar. The DXY erased all gains and as of writing, it trades at 102.35 (daily low) down 0.07%.

Economic data from Canada showed an unexpected reduction in the trade surplus in April due to imports rising more than exports, and the May Ivey PMI rose from 66.3 to 72.0.

The USD/CAD holds a bearish intraday bias and is looking at the June low at 1.2534. A break lower could trigger more losses to the 1.2500 area. Below the next level is 1.2465, with a daily close below suggesting more losses ahead.

On the upside, 1.2575 is again a resistance level to consider, followed by the 1.2610/15 area. While under 1.2615, the pair will hold a bearish/neutral outlook in the short term. Above 1.2615, the dollar could recover further toward 1.2680.

Technical levels