USD/CAD retreats to 1.2700 mark amid modest USD weakness, rising oil prices

• A combination of factors failed to assist USD/CAD to capitalize on its modest intraday gains.
• An uptick in oil prices underpinned the loonie and capped the upside amid renewed USD selling.
• A recovery in the risk sentiment, retreating US bond yields weighed on the safe-haven buck.

The USD/CAD pair trimmed a part of its intraday gains and was last seen trading around the 1.2700 mark, up nearly 0.20% heading into the North American session.

The pair attracted some buying on Thursday and built on the overnight bounce from the 1.2665 area, or the weekly low, though a combination of factors capped any meaningful upside. Intensifying the Russia-Ukraine conflict pushed crude oil prices higher and underpinned the commodity-linked loonie. This, along with the emergence of fresh US dollar selling, acted as a headwind for the USD/CAD pair.

Russia's claims of a partial pullback of troops from the Ukraine border earlier this week was countered by Western governments, saying that there were no signs of de-escalation on the ground. Apart from this, reports of shelling in eastern Ukraine boosted oil prices, though expectations for the return of Iranian oil in the markets kept a lid on any meaningful upside, at least for the time being.

On the other hand, the USD struggled to preserve its modest intraday gains and met with a fresh supply amid retreating US Treasury bond yields. Moreover, the risk sentiment recovered a bit after the latest satellite image showed that Russia has pulled back some equipment from the Ukraine border. This, along with less hawkish FOMC minutes released on Wednesday, weighed on the safe-haven greenback.

Market participants now look forward to the US economic docket, featuring the Philly Fed Manufacturing Index, Weekly Initial Jobless Claims and housing market data. This, along with the US bond yields, will influence the USD and provide some impetus to the USD/CAD pair. Apart from this, traders will further take cues from oil price dynamics to grab some meaningful opportunities around the major.