USD/CAD clings to gains near the highest level since early October

• USD/CAD continued scaling higher for the third successive day on Tuesday.
• Sliding oil prices undermined the loonie and acted as a tailwind for the pair.
• A stronger USD remained supportive, though overbought RSI capped gains.

The USD/CAD pair maintained its bid tone heading into the North American session and was last seen trading just below mid-1.2700s.

A combination of factors assisted the USD/CAD pair to prolong its recent strong upward trajectory and gain follow-through traction for the third successive day on Tuesday. This also marked the fifth day of a positive move in the previous six and pushed the pair to the highest level since early October.

WTI crude oil remained well within the striking distance of a multi-week low touched on Monday, which, in turn, undermined the commodity-linked loonie. Apart from this, the prevalent bullish sentiment surrounding the US dollar turned out to be a key factor that acted as a tailwind for the USD/CAD pair.

The market reacted little after the US announced to release 50 million barrels of crude from the Strategic Petroleum Reserve. This was the first coordinated move with some of the world's largest oil consumers, like China, India, South Korea, Japan and Britain, in an attempt to cool oil prices.

Meanwhile, the USD remained well supported by growing acceptance that the Fed would raise interest rates sooner rather than later to contain stubbornly high inflation. The bets increased further after US President Joe Biden nominated Jerome Powell to serve as the Fed chairman for a second term.

The fundamental backdrop seems tilted in favour of bullish traders and supports prospects for additional gains. That said, RSI on the daily chart has just started moving into the overbought territory and warrants some caution ahead of Tuesday's release of the flash US PMIs for November.

Technical levels to watch