USD/CAD remains below 1.3600 as Middle East tensions continue to underpin Oil prices

• USD/CAD regains some positive traction amid the emergence of some USD dip-buying.
• Reduced Fed rate cut bets push the US bond yields higher and revive the USD demand.
• Geopolitical risks lend support to Oil prices, underpinning the Loonie and capping gains.

The USD/CAD pair attracts some dip-buying during the Asian session on Tuesday and reverses a part of the previous day's losses. Spot prices, for now, seem to have stalled the recent pullback from the vicinity of mid-1.3600s or the YTD high touched last week, though remain below the 1.3600 round figure, warranting caution for bullish traders.

As investors look past the disappointing Canadian employment details released last Friday, the overnight goodish intraday rise in Crude Oil prices is seen underpinning the commodity-linked Loonie and acting as a headwind for the USD/CAD pair. The optimism over a possible ceasefire between Israel and Hamas faded rather quickly as talks remained deadlocked. Adding to this, Iran has threatened military action against Israel over an alleged strike on its embassy in Syria. This raises the risk of supply disruptions from the Middle East and lifts the black liquid closer to a five-month top set last Friday.

The downside for the USD/CAD pair, however, seems cushioned in the wake of the emergence of some buying around the US Dollar (USD), bolstered by elevated US Treasury bond yields. The upbeat monthly US jobs data (NFP) released on Friday, along with the recent hawkish remarks by several Federal Reserve (Fed) officials, suggest that the US central bank may delay cutting interest rates. This, in turn, pushes the yield on the benchmark 10-year US government bond to its highest level since late November, which helps revive the USD demand and might continue to act as a tailwind for the currency pair.

The aforementioned mixed fundamental backdrop, along with the recent repeated failures to find acceptance above the 1.3600 mark, makes it prudent to wait for strong follow-through buying before positioning for any further gains for the USD/CAD pair. Traders might also prefer to move to the sidelines and wait for more cues about the Fed's rate-cut path to determine the next leg of a directional move. Hence, the focus will remain glued to the release of the US consumer inflation figures for March and the FOMC meeting minutes on Wednesday, which will play a key role in influencing the USD price dynamics.