The USD/CAD pair reversed an early North American session spike to the 1.2570-75 area and was last seen trading near daily lows, just below mid-1.2500s.
Crude oil trimmed a part of its strong intraday gains and undermined the commodity-linked loonie. This, in turn, provided a modest lift to the USD/CAD pair and was seen as a key factor behind the latest leg of a sudden spike. That said, a subdued US dollar demand kept a lid on any meaningful gains.
Investors now seemed to have set aside worries about the economic fallout from the spread of the highly contagious Delta variant of the coronavirus. This was evident from a further recovery in the global risk sentiment, which continued acting as a headwind for the safe-haven greenback.
On the economic data front, the US Initial Weekly Jobless Claims unexpectedly jumped to 419K during the week ended July 16 from the previous week’s upwardly revised reading of 368K. This was seen as another factor that weighed on the buck and capped the upside for the USD/CAD pair.
That said, it will still be prudent to wait for some strong follow-through selling before positioning for any further decline. Sustained weakness below the key 1.2500 psychological mark will suggest that the USD/CAD pair has topped out and set the stage for a further corrective fall.