USD/CAD recovers above 1.3600 on renewed US Dollar strength

• USD/CAD gained traction in the early European session on Tuesday.
• US Dollar Index posts strong daily gains near 104.50.
• WTI continues to fluctuate in tight range slightly above $80.

USD/CAD gathered bullish momentum and advanced beyond 1.3600 in the European session on Tuesday following a drop toward 1.3500 earlier in the day. At the time od press, USD/CAD was up 0.4% on the day at 1.3625.

The broad-based US Dollar strength seems to be fueling the pair's rebound ahead of the Manufacturing PMI data from Canada and the US.

With market participants returning from the New Year holiday early Tuesday, the market volatility heightened and the US Dollar started to outperform its rivals despite the improving market mood.

The US Dollar Index, which tracks the US Dollar's performance against its major rivals, was last seen rising 1.1% on the day at 104.60. It's difficult to pinpoint the catalyst behind the renewed US Dollar strength as the 10-year US Treasury bond yield is down more than 2% and US stock index futures are up more than 1%. 

In the second half of the day, S&P Global will release the December Manufacturing PMI surveys for Canada and the US. Since the US PMI data will be a revision, the market reaction to Canada PMI is likely to drive the action.

Meanwhile, the barrel of West Texas Intermediate fluctuates in a tight channel at around $80.00, allowing the US Dollar's valuation to steer the pair's movements. Traders are trying to figure out how the reopening steps taken by China will  influence the energy demand outlook.

Technical levels to watch for