- A combination of factors assisted USD/CAD to regain positive traction on Monday.
- Weaker oil prices undermined the loonie and extended some support to the major.
- Hawkish Fed expectations acted as a tailwind for the USD and remained supportive.
The USD/CAD pair traded with a mild positive bias heading into the European session and was last seen hovering near the top end of its intraday trading range, around the 1.2465-70 region.
The pair managed to regain some positive traction on the first day of a new trading week and recovered a part of the previous session's heavy losses. The USD/CAD pair, for now, seems to have stalled last week's retracement slide from the vicinity of the 1.2600 mark and was supported by a combination of factors.
As investors looked past Friday's upbeat Canadian jobs data, a softer tone around crude oil prices undermined the commodity-linked loonie and extended some support to the USD/CAD pair. Apart from this, a modest US dollar strength provided an additional lift to the major during the first half of the trading action.
The USD remained well supported by expectations that the Fed is moving towards tapering its asset purchases sooner than anticipated. It is worth recalling that the June FOMC meeting minutes released last Wednesday revealed that Fed officials agreed on the need to be ready to act if inflation or other risks materialize.
Hence, the market focus will remain on the latest US consumer inflation figures due on Tuesday. This, along with Fed Chair Jerome Powell's semi-annual congressional testimony on Wednesday and Thursday, should provide fresh clues about the US central bank's policy outlook and influence the USD in the near term.
In the meantime, the USD/oil price dynamics will play a key role in influencing the USD/CAD pair and allow traders to grab some short-term opportunities amid absent relevant market moving economic releases.