USD/CAD trades with positive bias above 1.3200 mark, lacks bullish conviction

• USD/CAD gains some follow-through traction and recovers further from the YTD low.
• Retreating Crude Oil prices undermines the Loonie and lends some support to the major.
• Bets that the Fed will soon end its rate-hiking cycles cap gains for the USD and the pair.

The USD/CAD pair kicks off the new week on a positive note and builds on Friday's goodish recovery move from sub-1.3100 levels, or the lowest since September 2022. Spot prices stick to modest intraday gains through the Asian session and currently trade near the 1.3225 region, albeit lack any follow-through buying.

Crude Oil prices drift lower for the second straight day as worries that a global economic downturn will dent fuel demand prompt bulls to take some profits off the table, especially after the recent runup to the highest level since April. The concerns resurfaced following the release of rather unimpressive macro data from China, which showed that growth in the world's second-largest economy slowed in the second quarter. Adding to this, the resumption of Oil production in Libya over the weekend weighs on the black liquid. This, in turn, is seen undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair.

The US Dollar (USD), on the other hand, continues to draw support from the upbeat US data released on Friday, which showed that consumer confidence in July surged to the highest since September 2021. Moreover, a softer tone around the US equity futures further benefits the Greenback's relative safe-haven status. That said, growing acceptance that the Federal Reserve (Fed) will keep interest rates steady for the rest of the year, following the widely anticipated 25 bps in July, holds back the USD bulls from placing aggressive bets. This, in turn, might keep a lid on any meaningful upside for the USD/CAD pair, at least for the time being.

Market participants now look forward to the Empire State Manufacturing Index, due for release from the US later during the early North American session. Apart from this, the broader risk sentiment will drive the USD demand and provide some impetus to the major. Traders will further take cues from Oil price dynamics to grab short-term opportunities around the USD/CAD pair. The focus, however, will remain glued to the latest Canadian consumer inflation figures on Tuesday, which should play a key role in determining the Bank of Canada's next policy move and the next leg of a directional move for the major.

Technical levels to watch