USD/CAD struggles below 1.3000, hangs near two-week low ahead of US CPI

• USD/CAD turns lower for the fourth straight day and is pressured by a combination of factors.
• Bullish oil prices underpin the loonie and act as a headwind amid sustained USD selling bias.
• The market focus remains glued to the release of the crucial US consumer inflation figures.

The USD/CAD pair struggles to capitalize on its modest uptick on Tuesday and attracts fresh selling in the vicinity of the 1.3000 psychological mark. The pair turns lower for the fourth successive day and drops the 1.2970-1.2965 area during the first half of the European session, back closer to over a two-week low touched the previous day.

Crude oil prices reverse the early lost ground and hold steady near a one-week high amid concerns about tight global supply, fueled by Russia's threat to cut oil flows to any country that backs a price cap. This continues to underpin the commodity-linked loonie and acts as a headwind for the USD/CAD pair. The US dollar, on the other hand, remains depressed near the monthly low and turns out to be another factor exerting downward pressure on the major.

Given that the markets already seem to have priced in a 75 bps Fed rate hike at the September meeting, the prevalent risk-on mood is seen weighing on the safe-haven buck. Furthermore, signs of a sustained decline in the US inflation lead to a modest downtick in the US Treasury bond yields and contributes to the offered tone surrounding the greenback. That said, traders might refrain from placing aggressive bets ahead of the US consumer inflation figures.

The crucial US CPI report, due later during the early North American session, will play a key role in influencing the Fed's policy outlook and dictate the near-term trajectory for the USD. Traders will further take cues from OPEC’s monthly outlook report, which will impact oil price dynamics and produce short-term opportunities around the USD/CAD pair.

Technical levels to watch