USD/CAD climbs to multi-day tops, closer to mid-1.2300s

• USD/CAD regained positive traction on Monday and was supported by a combination of factors.
• Retreating oil prices undermined the loonie and remained supportive amid a modest USD strength.
• A sustained move beyond the 1.2340 area might have set the stage for a further appreciating move.

The USD/CAD pair built on its steady intraday positive move and climbed to 1.2340-45 region, or near one-week tops during the early North American session.

A combination of supporting factors assisted the USD/CAD pair to catch some fresh bids on the first day of a new trading week and reverse a part of last week's retracement slide. A modest pullback in crude oil prices undermined the commodity-linked loonie. Apart from this, the emergence of some fresh US dollar buying provided an additional boost to the major.

Despite mixed signals about the US inflation, investors remain concerned about the potential for an early move by the Fed to tighten its monetary policy. This, in turn, continued acting as a tailwind for the greenback. Bulls seemed rather unaffected by a fresh leg down in the US Treasury bond yields, instead took cues from mixed opening in the US equity markets.

Following the recent strong run to record levels, investors turned cautious and preferred to wait for the passage of a bipartisan US infrastructure deal, valued at $1.2 trillion over eight years. In the latest development, US President Joe Biden withdrew his threat to veto the measure unless a separate Democratic spending plan also passes Congress.

From a technical perspective, the latest leg up pushed the USD/CAD pair beyond an immediate resistance near the 1.2340 zone and might have already set the stage for additional gains. However, investors might refrain from placing any aggressive bets, rather prefer to move on the sidelines ahead of Friday's release of the closely watched US jobs report (NFP).

In the meantime, the broader market risk sentiment and the US fiscal headlines will play a key role in influencing the USD. Apart from this, oil price dynamics might further contribute to producing some short-term trading opportunities around the USD/CAD pair.

Technical levels to watch