USD/CAD approaches 1.3300, highest since November 2020 amid bearish oil/stronger USD

• USD/CAD gains strong follow-through traction on Friday and climbs to a 22-month high.
• Bearish oil prices undermine the loonie and offer support amid resurgent USD demand.
• The fundamental, technical backdrop supports prospects for a further appreciating move.

The USD/CAD pair prolongs this week's strong rally from the vicinity of mid-1.2900s and gains strong follow-through traction on Friday. The momentum lifts spot prices to the highest level since November 2020, with bulls now eyeing to reclaim the 1.3300 round-figure mark.

Crude oil prices languish near the weekly low and undermine the commodity-linked loonie, which, in turn, acts as a tailwind for the USD/CAD pair. Apart from this, the emergence of fresh buying around the US dollar provides an additional lift to the major and contributes to the bullish momentum.

Investors remain concerned that a deeper global economic downturn and fresh COVID-19 lockdowns in China will dent fuel demand. This, to a larger extent, overshadows worries about tight global supply and weighs on the black liquid, which remains on track to register a third successive week of losses.

The USD, on the other hand, is looking to build on the stronger US CPI-inspired rally amid rising bets for a more aggressive policy tightening by the Fed. This, along with the risk-off impulse, drives some haven flows towards the greenback and offers additional support to the USD/CAD pair.

Friday's strong momentum could also be attributed to some technical buying following the overnight sustained strength and close above the 1.3200 round-figure mark. A subsequent move beyond the previous YTD peak could be seen as a fresh trigger and might have set the stage for further gains.

Market participants now look forward to the Preliminary Michigan Consumer Sentiment Index from the US, due later during the early North American session. This, along with the US bond yields and the broader risk sentiment, will influence the USD and provide a fresh impetus to the USD/CAD pair.

Technical levels to watch