USD/CAD retreats from 2-month tops amid a solid rebound in oil prices

• USD/CAD failed to build on the momentum beyond the 1.3000 round-figure mark.
• A solid recovery in oil prices underpinned the loonie and exerted some pressure.
• The pullback seemed rather unaffected by some follow-through USD strength.

The USD/CAD pair finally broke down of its Asian session consolidation phase and refreshed daily lows, around the 1.3275-70 region in the last hour.

The pair struggled to extend its recent positive momentum beyond the 1.3300 round figure mark and witnessed a modest pullback through the early European session on Tuesday. The pair has eroded a part of the previous session's positive move to two-month tops and was being weighed down by a goodish rebound in oil prices.

Recovering oil prices trigger profit-taking

Following the overnight sharp sell-off to its lowest level in more than a year, oil prices staged a modest recovery on Tuesday amid improving global risk sentiment. Now up over 2% for the day, positive oil prices underpinned the commodity-linked currency – the loonie and prompted some long-unwinding trade.

Meanwhile, the intraday downfall seemed rather unaffected by the prevalent US dollar buying interest, supported by Monday's upbeat US ISM Manufacturing PMI. The greenback got an additional boost from the risk-on mood-led pickup in the US Treasury bond yields, albeit did little to lend any support.

It will now be interesting to see if the pair is able to attract any dip-buying at lower levels or continues with its corrective slide amid absent relevant market-moving economic releases on Tuesday. Hence, it will be prudent to wait for some strong follow-through weakness before positioning for any further weakness.

Technical levels to watch