USD/CAD pares early losses, trades modestly above 1.3400

• USD/CAD rose above 1.3400 ahead of American session.
• WTI fails to build on Monday's gains, retreats toward $40.
• US Dollar Index recovers above 93.50 on Tuesday.

The USD/CAD pair registered small losses and closed at 1.3390 on Monday. Although the pair continued to edge lower during the first half of the day on Tuesday, it reversed its direction in the last hour and was last seen gaining 0.15% on a daily basis at 1.3408.

Eyes on mid-tier US and Canada data

The renewed selling pressure surrounding crude oil seems to be making it difficult for the commodity-related loonie to stay resilient against its rivals on Tuesday. Ahead of the American Petroleum Institue's Weekly Crude Oil Stock report, the barrel of West Texas Intermediate (WTI) is down 1.3% on the day at $40.24.

On the other hand, the US Dollar Index is starting to push higher ahead of the American session, allowing USD/CAD to cling to its modest daily gains. 

The US economic docket will feature ISM-NY Business Conditions Index and IBD/TIPP Economic Optimism data on Tuesday. Moreover, the IHS Markit will release its Manufacturing PMI report for Canada. Market participants expect the economic activity in Canada's manufacturing sector to continue to contract in July. If the data surprises to the upside and arrives above the 50 threshold, we could see the CAD gather strength and drag USD/CAD lower.

Technical levels to watch for