USD/CAD climbs to multi-day high amid sliding oil prices, modest USD rebound

• A combination of supporting factors pushes USD/CAD higher for the second straight day.
• Weaker oil prices undermine the loonie and offer support amid a modest USD rebound.
• Recession fears weigh on investors’ sentiment and seem to benefit the safe-haven buck.

The USD/CAD pair builds on the overnight goodish bounce from its lowest level since June 10 and gains traction for the second successive day on Tuesday. The momentum lifts spot prices to a four-day high, around the 1.2875-1.2880 region during the early North American session, though lacks follow-through.

Crude oil prices remain on the defensive near a two-and-half-week low, which continues to undermine the commodity-linked loonie and act as a tailwind for the USD/CAD pair. The worsening global economic outlook, along with the recent COVID-19 outbreak in China, raises concerns about the fuel demand and is weighing on the black liquid.

The US dollar, on the other hand, stages a modest bounce from its lowest level since July 5 and offers additional support to the USD/CAD pair. The market sentiment remains fragile amid recession fears and mounting diplomatic tensions ahead of US House Speaker Nancy Pelosi's planned Taiwan visit. This, in turn, benefits the safe-haven buck.

The anti-risk flow, along with expectations that the Fed would not hike interest rates as aggressively as estimated, continued dragging the US Treasury bond yields lower. This might hold back the USD bulls from positioning for any further recovery and keep a lid on any meaningful upside for the USD/CAD pair, at least for the time being.

Market participants now look forward to the release of the US JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, might influence the USD and provide some impetus to the USD/CAD pair. Traders would also take cues from oil price dynamics to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch