• USD/CAD regains positive traction on Wednesday and is supported by a combination of factors.
• Sliding crude oil prices undermines the Loonie and acts as a tailwind amid sustained USD buying.
• The prospects for more rate hikes by the Fed and the risk-off mood benefit the safe-haven buck.

The USD/CAD pair catches fresh bids on Wednesday following the previous day's post-US CPI volatility and sticks to its intraday gains heading into the European session. The pair trades around the 1.3365 region, up nearly 0.25% for the day, and is supported by a combination of factors.

Weaker crude oil prices undermine the commodity-linked Loonie, which, along with broad-based US Dollar strength, acts as a tailwind for the USD/CAD pair. Investors now seem worried that economic headwinds stemming from rising borrowing costs will dent fuel demand. Apart from this, signs of another massive build in US crude inventories weigh on the black liquid. In fact, the American Petroleum Institute (API) report showed on Tuesday that US crude stockpiles grew over 10 million barrels in the week to February 10.

The USD, on the other hand, stands tall near a multi-week high amid firming expectations for further policy tightening by the Federal Reserve. In fact, the markets seen convinced that the US central bank will stick to its hawkish stance for longer in the wake of stubbornly high inflation. The bets were reaffirmed by the latest US CPI report released and hawkish commentary by several FOMC officials on Tuesday. This, along with the prevalent risk-off mood, benefits the safe-haven buck and lends support to the USD/CAD pair.

The aforementioned fundamental backdrop favours bullish traders and suggests that the path of least resistance for the USD/CAD pair is to the upside. Hence, some follow-through positive move, back towards reclaiming the 1.3400 round-figure mark, looks like a distinct possibility. The focus now shifts to the US economic docket, featuring the release of monthly Retail Sales and the Empire State Manufacturing Index. Traders will further take cues from oil price dynamics to grab short-term opportunities around the pair.

Technical levels to watch