• USD/CAD witnessed an intraday turnaround from over a one-week low amid resurgent USD demand.
• The prospects for a further tightening by the Fed, rising US bond yields acted as a tailwind for the buck.
• EU's proposed embargo on Russian crude underpinned the loonie and capped the upside for the pair.

The USD/CAD pair staged a goodish rebound from over a one-week low and climbed back above mid-1.2700s during the first half of the European session.

A combination of supporting factors assisted the USD/CAD pair to attract some buying near the 1.2710 area on Thursday and stall this week's sharp retracement slide from the YTD peak. Crude oil struggled to preserve its intraday gains to a near three-week high and was last seen trading with modest losses. This, in turn, undermined the commodity-linked loonie and acted as a tailwind for the major amid a goodish pickup in the US dollar demand.

Fed Chair Jerome Powell downplayed the possibility of a more aggressive tightening path, though stated that policymakers were ready to approve 50 bps rate hikes at upcoming meetings. Moreover, the markets are pricing in a further 200 bps rate hike for the rest of 2022, which was evident from a fresh leg up in the US Treasury bond yields. This, along with concerns about rising COVID-19 cases and strict lockdowns in China benefitted the safe-haven buck.

The USD/CAD pair allied over 50 pips from the daily swing low, though lacked follow-through buying. The European Union's proposal to phase out the Russian supply of crude oil within six months and refined products by the end of the year acted as a tailwind for the black liquid. This, in turn, held back traders from placing aggressive bearish bets around the Canadian dollar and kept a lid on any further gains for the USD/CAD pair, at least for now.

Market participants now look forward to the US economic docket, featuring the release of the usual Weekly Initial Jobless Claims data. This, along with the US bond yields and the broader market risk sentiment, will influence the buck. Traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair. The focus, however, will remain on Friday's release of the monthly jobs report from the US and Canada.

Technical levels to watch