Anna 
As the European trading session unfolds on Wednesday, USD/CAD is maintaining its position around 1.3400, slightly below the multi-week high observed in the previous session.
The U.S. dollar (USD) continues to find support from elevated U.S. Treasury yields, hovering close to the three-week high achieved on Friday. The resilience of the benchmark 10-year U.S. Treasury yield above the 4.0% mark, coupled with diminishing expectations of aggressive easing from the Federal Reserve (Fed), contributes to a bullish outlook for the currency pair.
Nevertheless, the recent uptick in USD/CAD lacked strong conviction, influenced by follow-through buying in crude oil prices. Ongoing geopolitical tensions in the Red Sea, the suspension of production at Libya’s largest oil field, and a further drawdown in U.S. crude inventories have supported crude prices, potentially bolstering the commodity-linked Canadian dollar and acting as a headwind for USD/CAD.
Traders, exercising caution, may opt to remain on the sidelines, anticipating the release of the latest U.S. consumer inflation data scheduled for Thursday. With uncertainties surrounding the timing of the first rate cut and its potential impact, the crucial Consumer Price Index (CPI) report is expected to offer insights into the Fed’s future policy direction. This information will significantly influence USD dynamics, determining the course of USD/CAD in the near term.
While U.S. bond yields are poised to sustain dollar demand, the absence of significant macro data from both the U.S. and Canada on Wednesday may lead traders to seize short-term opportunities driven by oil price fluctuations. However, the complex mix of fundamental factors suggests that USD/CAD is likely to persist in a range-bound pattern as it navigates through upcoming U.S. data risks.
