USD/CAD pares intraday gains, back below 1.2700 mark despite sustained USD strength

• USD/CAD struggled to capitalize on its modest intraday gains to the 1.2720 region.
• Bullish crude oil prices underpinned the loonie and acted as a headwind for the pair.
• The worsening Ukraine crisis benefitted the safe-haven USD and extended support.

The USD/CAD pair retreated a few pips from the daily high and was seen trading with modest intraday gains, just below the 1.2700 mark during the early European session.

The pair built on the overnight strong rebound of over 100 pips from sub-1.2600 levels, or the lowest since January 26 and gained some follow-through traction for the second straight day on Friday. News that Russian troops are shelling Europe's largest nuclear power plant in Ukraine triggered a fresh wave of the global risk aversion trade and boosted the safe-haven US dollar. This, in turn, extended some support to the USD/CAD pair.

That said, a fresh surge in crude oil prices underpinned the commodity-linked loonie and capped gains for the USD/CAD pair, rather attracted some selling near the 1.2720 region. Following the previous day's turnaround from the multi-year high, crude oil regained positive traction on Friday amid the worsening situation in Ukraine. The latest development fueled fears of a disruption in Russian crude exports and pushed oil prices higher.

The market nervousness, however, eased a bit after the International Atomic Energy reported that there has been no change reported in radiation levels at the Zaporizhzhia nuclear power plant site. Adding to this, Ukraine's emergency services said that fire at the nuclear plant has been extinguished and led to modest pullback in oil prices. This, along with sustained USD strength, remained supportive of the mildly positive tone around the USD/CAD pair.

Market participants now look forward to the US monthly jobs report, due for release later during the early North American session. The popularly known NFP report might influence the USD, which, along with oil price dynamics should provide some impetus to the USD/CAD pair. The focus, however, will remain glued to the incoming headlines surrounding the Russia-Ukraine saga.

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