USD/CAD witnessed a modest pullback from near two-week tops touched earlier this Tuesday

The USD/CAD pair edged lower heading into the European session and dropped to fresh daily lows, around the 1.2565-60 region in the last hour. The pair struggle to capitalize on its recent positive move beyond the very important 200-day SMA and witnessed a modest pullback from two-week tops, around the 1.2590 region touched earlier this Tuesday. Crude oil prices gained positive traction on Tuesday and built on the overnight rebound from three-week lows. This, in turn, underpinned the commodity-linked loonie and was seen as a key factor that exerted some downward pressure on the USD/CAD pair.

That said, uncertainty about how the COVID-19 situation in China will evolve and what this means for oil demand might act as a headwind for the black gold. China – the world's top crude oil importer – reported more COVID-19 infections on Monday in the latest outbreak of the disease. Adding to this, authorities have also stepped up mass testing to contain local transmission of the highly contagious Delta variant of the coronavirus.