- USD/CAD witnessed some selling on Wednesday and eroded a part of the overnight strong gains.
- Bullish crude oil prices underpinned the loonie and exerted some downward pressure on the pair.
- The downside seems cushioned amid a broad-based USD strength and ahead of the BoC decision.
The USD/CAD pair maintained its offered tone through the first half of the European session and was last seen trading near the daily low, just above the 1.2700 mark.
The pair struggled to capitalize on the previous day's strong bounce of around 100 pips from a near three-week low, around mid-1.2600s and met with a fresh supply on Wednesday. A further escalation in tensions between Russia and Ukraine pushed crude oil prices to the highest level since 2014. This, in turn, underpinned the commodity-linked loonie and exerted some downward pressure on the USD/CAD pair. That said, the emergence of fresh US dollar buying helped limit any deeper losses, at least for the time being.
The worsening situation in Ukraine, along with a goodish rebound in the US Treasury bond yields turned out to be key factors that acted as a tailwind for the greenback. In the latest developments, reports indicated that Russia has intensified the bombardment of Ukrainian cities and a large Russian convoy was approaching the capital Kyiv. Investors also seemed reluctant to place aggressive bets ahead of the Bank of Canada monetary policy decision, scheduled to be announced later during the early North American session.
From the US, traders will take cues from the ADP report on private-sector employment and Fed Chair Jerome Powell's semi-annual testimony before the House Financial Services Committee. The key focus, however, will remain on fresh geopolitical developments and the incoming headlines from the Russia-Ukraine talks. The mixed fundamental backdrop warrants some caution before positioning for any further depreciating move for the USD/CAD pair.
Technical levels to watch