• USD/CAD added to the overnight recovery gains and edged higher for the second straight day.
• Worries about surging COVID-19 cases benefitted the safe-haven USD and extended support.
• Bullish crude oil prices underpinned the loonie and kept a lid on any further gains for the pair.

The USD/CAD pair trimmed a part of its intraday gains and was last seen trading around the 1.2820-25 region during the early part of the European session.

The pair built on the previous day's goodish bounce from the 1.2770 area, or a one-and-half-week low, and gained some traction during the early part of the trading on Wednesday. The uptick, however, faltered near the 1.2830-35 region amid bullish crude oil prices, which tend to underpin the commodity-linked loonie.

The black gold remained supported by easing concerns over the Omicron variant and Tuesday's report from the American Petroleum Institute, which showed a draw of 3.1 million barrels last week. Investors now await the official crude oil supply data from the US Energy Information Administration, due later during the US session.

Meanwhile, the downside remains cushioned amid a modest US dollar strength. Despite the recent optimism, investors remain worried about the economic impact of the continuous surge in new COVID-19 cases. This, in turn, assisted the safe-haven US dollar to gain traction for the second successive day and acted as a tailwind for the USD/CAD pair.

The mixed fundamental backdrops warrant some caution for bullish traders and before confirming that the recent retracement from the YTD high has run its course. That said, the overnight rebound from support marked by the lower boundary of an ascending channel and the subsequent move up supports prospects for a further near-term appreciating move.

Wednesday's US economic docket, featuring the November Goods Trade Balance, Wholesale Inventories and Pending Home Sales data, might do little to provide any impetus. Hence, traders will take cues from the broader market risk sentiment, which will drive the USD demand. Apart from this, oil price dynamics should produce some trading opportunities around the USD/CAD pair.

Technical levels to watch