USD/CAD recovers further from YTD low, climbs to three-day high near 1.2530-35 area

A combination of supporting factors assisted the USD/CAD pair to regain positive traction on Thursday and recover further from its lowest level since November 2021 touched in the previous day. A sharp fall in crudeundermined the commodity-linked loonie and acted as a tailwind amid strong pickup in the US dollar demand.

Reports that the US is considering a massive release of up to 180 million barrels from its strategic petroleum reserve over several months triggered a steep decline in crude oil prices. Apart from this, fears that fresh COVID-19 restrictions in China could impact fuel further exerted downward pressure on the black liquid.

On the other hand, expectations for aggressive policy tightening by the Fed, along with fading hopes for diplomacy in Ukraine assisted the USD to reverse the overnight slide to a nearly two-week low. In fact, the markets seem convinced that the Fed would deliver a 50 bps rate hike at the next two meetings to combat high inflation.

The fundamental backdrop favours bulls and supports prospects for a further intraday appreciating move, though traders preferred to wait for important macro releases from the US and Canada. Thursday's economic docket highlights the US Core PCE Price Index and the monthly CanadianTraders will take cues from the OPEC+ meeting, which, along with fresh developments surrounding the Russia-Ukraine saga will influence oil price dynamics.

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