USD/CAD remains confined in a range near mid-1.2400s

• USD/CAD extended its sideways consolidative price move for the third successive day.
• The ongoing USD retracement slide acted as a headwind and capped gains for the pair.
• The risk-off impulse helped limit USD losses and extended some support to the major.

The USD/CAD pair lacked any firm directional bias and seesawed between tepid gains/minor losses, around mid-1.2400s through the early European session.

A combination of diverging forces failed to provide any meaningful impetus to the USD/CAD pair and led to a subdued/range-bound price for the third successive day on Tuesday. The US dollar extended its retracement slide from the post-NFP swing highs and acted as a headwind for the major. The downside, however, remains cushioned amid a softer tone around crude oil prices, which tend to drive demand for the commodity-linked loonie.

The greenback was pressured by the Fed's dovish outlook and a fresh leg down in the US Treasury bond yields. It is worth recalling that the US central bank stuck to its transitory inflation narrative and indicated that policymakers were in no rush to hike interest rates. That said, speculations that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation should help limit USD losses.

Apart from this, the risk-off impulse extended some support to the safe-haven greenback. This, in turn, held back traders from placing aggressive bearish bets around the USD/CAD pair, which so far has managed to defend 100-hour SMA support. This makes it prudent to wait for a strong follow-through selling before positioning for an extension of last week's rejection slide from the very important 200-day SMA resistance.

Market participants now look forward to the US economic docket, featuring the release of the Producer Price Index later during the early North American session. This, along with Fed Chair Jerome Powell's remarks at an online conference, the US bond yields and the broader market risk sentiment, will influence the USD. Traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.

Technical levels to watch