USD/CAD holds steady above 1.3600 ahead of Canadian CPI, US Consumer Confidence Index

• USD/CAD attracts some dip-buying on Wednesday amid a modest USD strength.
• The Fed’s hawkish outlook and rising US bond yields help revive the USD demand.
• Bullish oil prices underpin the Loonie and keep a lid on further gains for the pair.
• Traders eye Canadian CPI and the US consumer confidence index for a fresh impetus.

The USD/CAD pair shows some resilience below the 1.3600 mark for the second straight day and attracts some dip-buying on Wednesday. The pair sticks to its modest intraday gains through the first half of the European session and is currently placed near the top end of the daily trading range, around the 1.3615-1.3620 region.

The US Dollar catches fresh bids amid a further rise in the US Treasury bond yields and turns out to be a key factor acting as a tailwind for the USD/CAD pair. The spillover effect of the Bank of Japan's policy tweak on Tuesday, widening the range for fluctuations in the 10-year government bond yield, continues to push the US bond yields higher. Apart from this, a more hawkish commentary by the Fed last week lifts the yield on the benchmark 10-year US government bond to a fresh monthly high and lends support to the greenback.

That said, a goodish recovery in the global risk sentiment - as depicted by a strong move up in the US equity futures - keeps a lid on any further gains for the safe-haven buck. Apart from this, an intraday pickup in crude oil prices underpins the commodity-linked Loonie and contributes to capping the upside for the USD/CAD pair, at least for the time being. Oil prices remain well supported by Tuesday's bullish report by the American Petroleum Institute, which showed a larger-than-expected draw in the US crude oil inventories.

Furthermore, the latest optimism over the easing of COVID-19 curbs in China further seems to benefit crude oil prices. That said, worries about rising cases in the world's top oil importer - China - could act as a headwind for the black liquid. The mixed fundamental backdrop warrants caution before placing aggressive bullish bets around the USD/CAD pair ahead of the crucial Canadian consumer inflation figures, due later during the early North American session.

Traders will further take cues from the US economic docket, featuring the release of the Conference Board's Consumer Confidence Index. This, along with the US bond yields and the broader risk sentiment, should drive the USD demand and provide some impetus to the USD/CAD pair. Apart from this, oil price dynamics could contribute to producing short-term trading opportunities.

Technical levels to watch