USD/CAD inter-market: pointing to consolidation around 1.2770 support

The USD/CAD pair extended its last week's sharp reversal from the vicinity of 1.3100 handle and is now seen drifting lower for second consecutive day. 

The pair has now dropped below 1.2800 handle, with a sharp rise in crude oil prices acting as the main driver for the latest leg of downfall. Maintaining its high correlation with crude oil prices, the Canadian Dollar (CAD) continues to gain traction against is US counterpart as oil prices now back close to $49.00/barrel mark. 

On the first trading day of a fresh trading week, the USD/CAD pair has dropped back below 1.2800 level and the pair's latest leg of downfall has been accompanied by a falling expectations of a Fed rate-hike in the near-term, with the CME Group Fed Fund futures now showing only 12% probability of such an action in July, 

Adding to this, rising expectations of the UK remaining with the EU has been supportive for the global risk-on rally and is being reinforced by a rebound in the US and Canadian 10-yr Treasury yields. Global risk-on sentiment is hurting the safe-haven demand for the greenback. 

However, a sharp contraction of the yield differentials between US treasuries and Canadian bonds seems to be in favor of the US Dollar, warranting a near-term bounce-back. However, continuing buying interest in the black gold might restrict any swift recovery for the USD/CAD pair, resulting into near-term consolidation around 1.2770 level.