• USD/CAD attracts some dip-buying on Friday and is supported by a combination of factors.
• Retreating oil prices undermines the Loonie and acts as a tailwind amid a modest USD uptick.
• A sustained move beyond the 1.3700 mark is needed to support prospects for additional gains.

The USD/CAD pair reverses an intraday dip to the 1.3620-1.3615 area and hits a fresh weekly high during the mid-European session on Friday. Spot prices, however, struggle to capitalize on the move and remain below the 1.3700 mark, though the bias seems tilted in favour of bullish traders.

Crude oil prices extend the previous day's retracement slide from over a one-week high and undermine the commodity-linked Loonie. This, along with the emergence of some US Dollar dip-buying, is seen acting as a tailwind for the USD/CAD pair. Investors seem worried that rapidly rising borrowing costs could lead to a deeper global economic downturn and dent fuel demand, which, in turn, is exerting pressure on the black liquid for the second straight day.

The USD, on the other hand, draws support from a more hawkish commentary by the Federal Reserve and is looking to build on the overnight solid rebound from a six-month low. It is worth recalling that the US central bank signalled on Wednesday that it will continue to raise rates to crush inflation. This, in turn, triggers a further recovery in the US Treasury bond yields. Apart from this, the risk-off impulse offers additional support to the safe-haven buck.

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The prospects for further policy tightening by major central banks, along with recession fears, take its toll on the global risk sentiment. This is evident from a sea of red across the equity markets, which drives investors to take refuge in traditional safe-haven assets. The USD/CAD bulls, meanwhile, await a sustained strength beyond the 1.3700 round-figure mark before positioning for an extension of the upward trajectory witnessed over the past month or so.

Traders now look forward to the US economic docket, featuring the release of the flash PMI prints for December. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand and provide some impetus to the USD/CAD pair. Apart from this, oil price dynamics should also contribute to producing short-term opportunities on the last day of the week.