• USD/CAD gains some positive traction on Thursday, albeit lacks strong follow-through buying.
• An uptick in Crude Oil prices underpins the Loonie and keeps a lid on the intraday positive move.
• Hawkish Fed expectations, rising US bond yields boost the USD and continue to act as a tailwind.

The USD/CAD pair struggles to capitalize on its intraday positive move on Thursday and retreats to the 1.3600 round-figure mark during the first half of the European session.

Crude Oil prices reverse a modest dip and touch a nearly two-week high in the last hour, which, in turn, is seen underpinning the commodity-linked Loonie and acting as a headwind for the USD/CAD pair. The uptick in Oil prices, however, lacks bullish conviction amid worries that rapidly rising borrowing costs will dampen economic growth and dent fuel demand. Apart from this, resurgent US Dollar demand, bolstered by hawkish Fed expectations, supports prospects for some meaningful upside for the major.

The markets now seem convinced that the US central bank will keep interest rates higher for longer than expected in the wake of stubbornly high inflation. Furthermore, Minneapolis Fed President Neel Kashkari opened the door for a 50 bps hike at the next meeting in March, which continues to push the US Treasury bond yields higher.  In fact, the yield on the benchmark 10-year US government bond climbs to its highest level since November, further beyond the 4.0% threshold, and acts as a tailwind for the Greenback.

Furthermore, the prevalent cautious market mood - amid looming recession risks - further benefits the safe-haven buck. Apart from this, speculations that the Bank of Canada (BoC) could pause the policy-tightening cycle, bolstered by a softer Canadian CPI report released last week, favours the USD/CAD bulls. This, in turn, suggests that the path of least resistance for spot prices is to the upside.

Market participants now look forward to the release of the US Weekly Initial Jobless Claims data, due later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the USD/CAD pair. Traders will further take cues from Oil price dynamics to grab short-term opportunities

Technical levels to watch