• USD/CAD witnessed some follow-through selling for the second straight day on Tuesday.
• Rising oil prices, upbeat Canadian data underpinned the loonie and exerted pressure.
• Rallying US bond yields acted as a tailwind for the USD and helped limit deeper losses.

The USD/CAD pair managed to find decent support near the 1.2900 mark on Tuesday and trimmed a part of its heavy intraday losses. The pair was seen trading around the 1.2935-1.2940 region during the early North American session, still down nearly 0.30% for the day.

Worries about tightening global supplies allowed crude oil prices to regain positive traction and move away from a one-month low, which, in turn, underpinned the commodity-linked loonie. The Canadian dollar drew additional support from upbeat domestic data, showing that Retail Sales recorded growth of 0.9% in April as against the previous month's upwardly revised reading of 0.2%. Excluding autos, core retail sales rose 1.3% during the reported month versus 0.6% anticipated.

That said, the emergence of some US dollar dip-buying offered some support to the USD/CAD pair. Expectations that the Fed would retain its aggressive policy tightening stance, along with the risk-on impulse, pushed the US Treasury bond yields higher. This, in turn, acted as a tailwind for the buck and helped limit deeper losses for the major. Spot prices, for now, seem to have stalled the recent pullback from the YTD peak, around the 1.3080 region touched last Friday.

It, however, remains to be seen if the USD/CAD pair is able to attract fresh buying as the focus now shifts to the latest Canadian consumer inflation figures, due for release on Wednesday. Investors will further take cues from Fed Chair Jerome Powell's two-day congressional testimony before placing directional bets. In the meantime, the broader risk sentiment and the US bond yields might influence the USD, which, along with oil price dynamics could provide some impetus to the pair.

Technical levels to watch