USD/CAD clings to daily gains above 1.31 on broad USD strength

• US Dollar Index climbs above 96.50 ahead of Fedspeak.
• NFIB Business Optimism Index in the US edges lower in June.
• WTI edges higher to $58 following yesterday's consolidation.

The USD/CAD pair posted modest daily gains on Monday and continued to push higher on Tuesday boosted by the broad-based USD strength. As of writing, the pair was trading at 1.3123, adding 0.25% on a daily basis.

Last Friday's impressive nonfarm payrolls data from the U.S. triggered a USD buying wave that seems to be dominating the FX space since then as investors seem to be having second thoughts about the Fed cutting rates multiple times this year. This shift in the mood is allowing the US Treasury bond yields push higher and provide additional support to the greenback.

As investors are waiting for Atlanta Fed President Bostic and St. Louis Fed President Bullard to speak later in the day, the US Dollar Index is up 0.2% on the day at 97.56, a little below the multi-week high that it set at 97.60 earlier today.

On the other hand, the barrel of West Texas Intermediate is posting modest daily gains on the day and is trading near $58, helping the commodity-sensitive loonie limit its losses against the dollar.

Tomorrow, the Bank of Canada will announce its rate decision and publish its policy statement. Previewing this event, "We expect the central bank to remain in pause mode and reiterate the need to maintain the overnight rate below its neutral range," said analysts at National Bank of Canada.

"There a risk though that even a balanced approach might sound hawkish to markets in comparison to the dovish turns performed by other central banks lately. For this reason, we’d suggest keeping an eye on the Canadian dollar on the day of the announcement.”

Technical levels to watch for