• USD/CAD was seen oscillating in a range through the first half of the trading on Wednesday.
• An uptick in crude oil prices underpinned the loonie and kept a lid on any meaningful upside.
• The Fed’s hawkish outlook acted as a tailwind for the USD and extended support to the pair.

The USD/CAD pair lacked any firm directional bias and remained confined in a narrow trading band, just above the 1.2900 mark heading into the European session.

Investors turned optimistic amid the prospects that vaccines may be more effective than first thought in fighting the Omicron variant of the coronavirus. This, in turn, acted as a tailwind for crude oil prices, which underpinned the commodity-linked loonie and capped the upside for the USD/CAD pair.

The downside, however, remains cushioned amid the underlying bullish sentiment surrounding the US dollar, bolstered by the Fed's hawkish outlook. It is worth recalling that the so-called dot plot indicated that the Fed officials expect to raise the fed funds rate at least three times next year.

Meanwhile, a fresh leg down in the US Treasury bond yields failed to impress the USD bulls or provide any meaningful impetus to the USD/CAD pair. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders and supports prospects for the emergence of some dip-buying around the pair.

Market participants now look forward to the release of the final US Q3 GDP print and the Conference Board's US Consumer Confidence Index, due later during the early North American session. This, along with the US bond yields, will influence the USD and provide some trading impetus to the USD/CAD pair.

Apart from this, traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair. That said, the intraday movement is more likely to remain restricted amid relatively thin liquidity conditions heading into the end-of-year holiday season.

Technical levels to watch