USD/CAD rebounds in tandem with US dollar, nears 1.2750

USD/CAD reverses a dip below 1.2700, as bulls track the DXY rebound.
Risk-off mood returns, boosts DXY, downs WTI prices.
Focus remains on covid developments and EIA crude stockpiles data.
USD/CAD is holding onto the recovery gains above 1.2700 in European trading, tracking the rebound in the US dollar across the board.

The safe-haven demand for the greenback has returned amid souring risk sentiment, as persisting concerns over the Delta covid variant continue to outweigh any optimism over the US stimulus. Ongoing US-China tensions also add to the cautious market mood, collaborating with the dollar’s renewed uptick.

Meanwhile, falling WTI prices drag the resource-linked Loonie lower, supporting the bounce in the major. The US oil drops back below $67 amid a reduced appetite for risk assets and an unexpected build in the US crude supplies, as shown by the American Petroleum Institute (API) late Tuesday.
Looking ahead, the pair will remain at the mercy of the US dollar dynamics and oil-price action while the Senate Democrats’ vote on the infrastructure bill will also remain in focus.

USD/CAD technical outlook
FXStreet’s Analyst, Anil Panchal, notes: “A clear break of 1.2730 will enable the USD/CAD bulls to refresh the monthly high beyond 1.2800. Alternatively, a downside break of the 21-SMA level of 1.2675 will be probed by the stated support line near 1.2655 and the early-month top surrounding 1.2590.”