USD/CAD bounces off low, finds some support near 1.2800 amid retreating oil prices

The USD/CAD pair recovered a few pips from the daily low and was last seen trading around the 1.2835-1.2840 region, still down over 0.30% for the day.

Having struggled to make it through the 1.2900 round-figure mark, the USD/CAD pair came under some selling pressure on Wednesday and reversed the overnight gains to the highest level since December 23. A positive turnaround in the risk sentiment dragged the safe-haven US dollar away from the 22-month high touched earlier this week and exerted some downward pressure on the major.

The global equity markets made a solid comeback in reaction to the news that Ukrainian Foreign Minister Dmytro Kuleba and his Russian counterpart Sergey Lavrov have agreed to meet on Thursday. This would be the first potential talk between the two officials since Russian troops invaded Ukraine on February 24 and revived hopes of a diplomatic solution to end the war in Ukraine.

That said, the risk of a further escalation in tensions between Russian and Western powers should cap the optimistic move in the markets. Apart from this, rising US Treasury bond yields should act as a tailwind for the USD. Apart from this, retreating crude oil prices could undermine the commodity-linked loonie and lend some support to the USD/CAD pair, at least for now.

Nevertheless, the pair, for now, seems to have snapped four successive days of the winning streak and remains at the mercy of developments surrounding the Russia-Ukraine saga. Meanwhile, the fundamental backdrop supports prospects for a further near-term appreciating move, though bulls are likely to wait for sustained strength beyond the 1.2900 mark before placing fresh bets.

Technical levels to watch