USD/CAD flirts with multi-week high, bulls await a sustained move beyond 1.3300 mark

• USD/CAD attracts some dip-buying and climbs back closer to a three-week high set on Tuesday.
• Bets for one more Fed rate hike help the USD to reverse modest intraday losses and lend support.
• Bullish Crude Oil prices could underpin the Loonie and cap any meaningful upside for the major.

The USD/CAD pair turns positive for the second straight day on Wednesday, following an Asian session dip to the 1.3260 area, and climbs back closer to over a three-week high touched the previous day. Bullish traders, however, might still wait for a sustained strength above the 1.3300 round-figure mark before positioning for any further appreciating move.

Despite the fact that Fitch downgraded the US government's credit rating to AA+ from AAA, expectations for one more 25 bps rate hike by the Federal Reserve (Fed) act as a tailwind for the US Dollar (USD) and assist the USD/CAD pair to attract some dip-buying. In fact, Fed Chair Jerome Powell said last week that the economy still needs to slow and the labour market to weaken for inflation to credibly return to the 2% target. Moreover, the incoming US macro data points to an extremely resilient economy and supports prospects for further policy tightening by the Fed.

Apart from this, a slight deterioration in the global risk sentiment - as depicted by a generally weaker tone around the equity markets - further benefits the safe-haven Greenback. That said, the recent bullish run-up in Crude Oil prices to the highest level since April 17 underpins the commodity-linked Loonie and might hold back bulls from placing aggressive bets around the USD/CAD pair. A substantially larger-than-expected drawdown in US inventories over the past week helps offset demand concerns and continues to lend some support to the black liquid.

From a technical perspective, however, the overnight move and acceptance above the 1.3240-1.3245 supply zone suggest that the path of least resistance for the USD/CAD pair is to the upside. Some follow-through buying beyond the 50-day Simple Moving Average (SMA) will reaffirm the positive outlook and pave the way for further gains. Traders now look to the US ADP report on private-sector employment, due later during the early North American session. This, along with the broader risk sentiment, will drive the USD and provide some impetus to the major.

Apart from this, Oil price dynamics should allow traders to grab short-term opportunities. The focus, meanwhile, will remain glued to the monthly employment details from the US - popularly known as the NFP report - and Canada, due for release on Friday.

Technical levels to watch