USD/CAD ticks higher on sliding Oil prices, subdued USD demand acts as a headwind

• USD/CAD edges higher during the Asian session on Monday, albeit lacks follow-through.
• A softer tone around Oil prices undermines the Loonie and lends support to the major.
• The Fed rate hike uncertainty holds back traders from placing bullish bets and caps gains.

The USD/CAD pair kicks off the new week on a slight positive note and for now, seems to have snapped a four-day losing streak to a one-month low, around the 1.3315-1.3310 region touched on Friday. Spot prices, however, lack bullish conviction and remain below mid-1.3300s through the Asian session, warranting some caution before positioning for any further intraday appreciating move.

Crude Oil prices remain depressed for the third successive day in the wake of worries that a global economic slowdown will dent fuel demand. This, in turn, is seen undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair, though subdued US Dollar (USD) price action caps the upside. In fact, the uncertainty over the Federal Reserve's (Fed) rate-hike path fails to assist the USD to capitalize on Friday's modest bounce from the monthly low.

It is worth recalling that the recent dovish rhetoric by a slew of Fed officials fueled speculations for an imminent pause in the US central bank's year-long policy tightening cycle in June. The markets, however, are still pricing in the possibility of another 25 bps lift-off in July, which, in turn, acts as a tailwind for the buck and lends support to the USD/CAD pair. Traders, meanwhile, seem reluctant and prefer to wait on the sidelines ahead of this week's key data/central bank event risks.

The latest US consumer inflation figures are due for release on Tuesday, which will be followed by the outcome of the highly-anticipated two-day FOMC monetary policy meeting on Wednesday. In the meantime, the Bank of Canada's (BoC) surprise rate hike last week might continue to lend some support to the Canadian Dollar (CAD) and cap gains for the USD/CAD pair in the absence of any relevant market-moving economic releases on Monday, either from the US or Canada.

Technical levels to watch