USD/CAD jumps to near two-week tops, further beyond 1.2400 ahead of BoC

• A combination of factors assisted USD/CAD to gain positive traction for the third successive day.
• Retreating oil prices undermined the loonie and extended support amid a modest USD strength.
• Bulls might refrain from placing aggressive bets ahead of the US data and BoC policy decision.

The USD/CAD pair broke through the 1.2400 barrier during the early European session and shot to near two-week tops in the last hour. The pair was last seen trading around the 1.2415-20 region, up 0.25% for the day.

Following a brief consolidation through the first half of the trading action on Wednesday, the USD/CAD pair caught fresh bids and built on its recent recovery from sub-1.2300 levels, or four-month lows. This marked the third successive day of a positive move – also the fourth in the previous five – and was sponsored by a combination of factors.

Crude oil prices edged lower and reversed the overnight gains back closer to multi-year tops. This, in turn, undermined the commodity-linked loonie and acted as a tailwind for the USD/CAD pair. Apart from this, the latest leg of a sudden spike over the past hour or so could further be attributed to the emergence of some buying around the US dollar.

Tuesday's upbeat US macro data turned out to be a key factor that extended some support to the greenback amid expectations for an early policy tightening by the Fed. That said, the dominant risk-on mood, along with a further decline in the US Treasury bond yields, might cap gains for the safe-haven greenback and the USD/CAD pair.

Investors might also refrain from placing aggressive bets, rather prefer to move on the sidelines and wait for a fresh catalyst from the Bank of Canada meeting this Wednesday. The Canadian central bank will announce its policy decision later during the early North American session and infuse some volatility around the USD/CAD pair.

Meanwhile, the US economic docket highlights the release of Durable Goods Orders. Apart from this, the US bond yields and the broader market risk sentiment could influence the greenback demand. Traders will further take cues from oil price dynamics to grab some meaningful opportunities around the USD/CAD pair.

Technical levels to watch