USD/CAD bulls have the upper hand near 1.2830-35 area, over one-week high

The USD/CAD pair edged higher during the early part of the European session and climbed to a one-and-half-week high, around the 1.2835 region in the last hour.

Following an intraday dip to sub-1.2800 levels, the USD/CAD pair attracted some buying for the fourth successive day and built on last week's goodish rebound from the lowest level since January 26. The uptick lacked any obvious fundamental catalyst and could be attributed to some technical buying following the overnight sustained strength back above the 1.2780-1.2785 static resistance. That said, a combination of factors might hold back bulls from placing aggressive bets and keep a lid on any runaway rally, at least for the time being.

Crude oil prices stalled the previous day's sharp pullback from the highest level since 2008 after the United States reportedly is willing to move ahead with a ban on Russian oil imports. This, along with a further escalation in the Russia-Ukraine war, acted as a tailwind for the black liquid, which, in turn, could underpin the commodity-linked loonie. On the other hand, a solid recovery in the equity markets prompted some profit-taking around the safe-haven US dollar and might further contribute to capping any meaningful gains for the USD/CAD pair.

The risk sentiment got a strong lift in reaction to a report that the European Union (EU) is set to outline a plan this week to jointly issue bonds on a potentially massive scale to finance energy and defence spending. That said, the worsening situation in Ukraine, along with the risking risk of stagflation, should keep a lid on any optimistic move in the markets. Apart from this, a sharp intraday spike in the US Treasury bond yields supports prospects for the emergence of some USD dip-buying and a further appreciating move for the USD/CAD pair.

The fundamental backdrop seems tilted in favour of bullish traders and a possible move towards testing February monthly swing high, around the 1.2875-1.2880 region. In the absence of any major market-moving economic releases, either from the US or Canada, the focus will remain glued to developments surrounding the Russia-Ukraine saga. The incoming headlines would drive the broader risk sentiment and influence the USD. Traders will further take cues from oil price dynamics to grab some short-term opportunities around the USD/CAD pair.

Technical levels to watch