USD/CAD oscillates in a range below 1.3400 mark, eyes US CPI for fresh impetus

• USD/CAD attracts some buyers for the second straight day, albeit lacks bullish conviction.
• Retreating Oil prices undermines the Loonie and lends support amid a modest USD uptick.
• The Fed’s less hawkish outlook seems to cap the USD ahead of the crucial US CPI report.

The USD/CAD pair edges higher for the second straight day on Wednesday, albeit struggles to capitalize on the move and remains below the 1.3400 mark through the mid-European session.

Crude Oil prices come under some selling pressure and stall a four-day recovery from a 17-month low touched last week. This, in turn, is seen undermining the commodity-linked Loonie, which, along with a modest US Dollar (USD) strength, acts as a tailwind for the USD/CAD pair. The recent rise in the US Treasury bond yields, bolstered by easing fears of a full-blown banking crisis in the US, turns out to be a key factor lending some support to the Greenback. Apart from this, a generally weaker tone around the equity markets further seems to benefit the safe-haven buck.

That said, the uncertainty over the US debt limit, along with the Federal Reserve's (Fed) less hawkish outlook, keeps a lid on the US bond yields and the USD. It is worth recalling that US President Joe Biden and House of Representatives Speaker Kevin McCarthy remained divided over raising the $31.4 trillion US debt limit, though agreed to further talks aimed at breaking the deadlock. The Fed, meanwhile, last week outlined a more stringent and data-driven approach to hiking rates further. Moreover, the markets have been pricing in the possibility of rate cuts later this year.

This, in turn, is holding back the USD bulls from placing aggressive bets and capping gains for the USD/CAD pair as traders keenly await the release of the latest US consumer inflation figures during the early North American session. The crucial US CPI report will influence expectations about the Fed's next policy move, which, in turn, should drive the USD demand. Apart from this, Oil price dynamics should provide some impetus to the USD/CAD pair and further contribute to producing short-term trading opportunities.

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