Tensions In The Middle East Support Oil Prices, USD/CAD Remains Blocked at 1.3600

The USD/CAD currency pair attracted some bargain hunting in Asia on Tuesday and recovered some of the previous day’s losses. At present, USD/CAD seems to have interrupted its recent decline from around 1.3600, the year’s high hit last week, but it still encounters resistance at the 1.3600 round number, and bullish traders need to be cautious.

As investors began to look past weak Canadian specific employment data released on Friday, crude oil prices maintained good gains during the session, which was seen as supporting the commodity-linked Canadian dollar and weighing on USD/CAD. Optimism about a possible ceasefire between Israel and Hamas quickly faded as negotiations remained deadlocked. Additionally, Iran has threatened military action against Israel following an alleged attack on the Israeli embassy in Syria. That raises the risk of crude supply disruptions in the Middle East and brings crude prices closer to a five-month high set on Friday.

However, there has been some buying in the greenback, supported by rising US Treasury yields, which appears to be easing downward pressure on USD/CAD. The positive monthly U.S. non-farm payroll data released last Friday, coupled with recent hawkish comments from several Federal Reserve (Fed) officials, indicate that the U.S. central bank may delay cutting interest rates. This in turn has pushed the 10-year U.S. Treasury yield to its highest level since late November, helping to revive demand for the U.S. dollar and may continue to be a “boost” factor for USD/CAD.

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