USD/CAD refreshes weekly low; hangs near mid-1.3300s amid rising oil prices, weaker USD

• USD/CAD drifts lower for the second straight day and is pressured by a combination of factors.
• The ongoing rally in oil prices underpins the Loonie and weighs on the pair amid a weaker USD.
• A sustained break below the 1.3400 mark might have already set the stage for additional losses.

The USD/CAD pair extends this week's retracement slide from the 1.3470-1.3475 region and remains under heavy selling pressure for the second successive day on Wednesday. The downward trajectory picks up pace during the first half of the European session and drags spot prices to 
fresh weekly low, around the 1.3365 region in the last hour.

Crude oil prices add to the previous day's strong gains and scale higher for the third successive day amid concerns about supply disruptions caused by a major earthquake in Turkey. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with the emergence of fresh selling around the US Dollar, exerts downward pressure on the USD/CAD pair.

Fed Chair Jerome Powell failed to offer fresh hawkish signals on Tuesday and reiterated that the process of disinflation was underway. The comments dampen market expectations that the Fed will stick to its hawkish stance and raises hopes that interest rates may not rise much further. This, in turn, drags the US Treasury bond yields lower and weighs on the USD.

The prevalent cautious mood, however, could lend some support to the safe-haven greenback. The market sentiment remains fragile amid worries about economic headwinds stemming from rapidly rising borrowing costs, the COVID-19 outbreak in China and the protracted Russia-Ukraine war. Furthermore, looming recession risks might keep a lid on any further gains for the black liquid.

The aforementioned factors might contribute to limiting the downside for the USD/CAD pair, at least for the time being. That said, the overnight break below the 1.3400 round-figure mark suggests that the USD/CAD pair's recent strong recovery move from the lowest level since November 16 has run its course and supports prospects for a further intraday depreciating move.

In the absence of any relevant market-moving economic data from the US, traders will take cues from scheduled speeches by influential FOMC members. This, along with the US bond yields and the broader risk sentiment, will drive the USD. Apart from this, oil price dynamics should provide some impetus and allow traders to grab short-term opportunities around the USD/CAD pair.

Technical levels to watch