The USD/CAD pair maintained its offered tone heading into the North American session and was last seen trading near the daily low, around the 1.3000 psychological mark.
The pair witnessed some selling on the last day of the week and extended the overnight modest pullback from the 1.3075 region, or its highest level since November 2020. Crude oil prices edged higher for the third successive day and underpinned the commodity-linked loonie. Apart from this, modest US dollar pullback from a two-decade high exerted downward pressure on the USD/CAD pair.
Concerns about tightening global supply amid the prospect of a European Union ban on Russian oil turned out to be a key factor that acted as a tailwind for the black liquid. That said, worries about faltering global demand on the back of strick COVID-19 lockdowns in China and slowing global growth might keep a lid on any meaningful gains for crude oil, at least for the time being.
On the other hand, a goodish recovery in the global risk sentiment - as depicted by a positive tone around the equity markets - dented demand for the traditional safe-haven buck. That said, a combination of factors helped limit any deeper USD corrective slide and supports prospects for the emergence of some dip-buying around the USD/CAD pair, warranting caution for bearish traders.
The risk-on impulse in the markets, along with the prospects for a more aggressive policy tightening by the Fed, triggered a solid rebound in the US Treasury bond yields. In fact, Fed Chair Jerome Powell pledged on Thursday that the US central bank was prepared to do more to curb soaring inflation and is ready to raise interest rates by 50 bps at each of the next two policy meetings.
Hence, it will be prudent to wait for strong follow-through selling before confirming that the USD/CAD pair has topped out in the near term. Market participants now look forward to the prelim US Michigan Consumer Sentiment Index for a fresh impetus. Apart from this, oil price dynamics should allow traders to grab some short-term opportunities on the last day of the week.
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