USD/CAD holds steady above 1.3500, bullish Oil prices continue to act as a headwind

• USD/CAD struggles to gain any meaningful traction and oscillates in a range on Monday.
• Bullish Oil prices underpin the Loonie and act as a headwind amid a modest USD slide.
• The downside seems limited as traders seem reluctant ahead of the FOMC policy meeting.

The USD/CAD pair kicks off the new week on a subdued note and remains well within the striking distance of a two-week low set on Friday. Spot prices, however, manage to hold above the 1.3500 psychological mark through the Asian session, though struggle to attract any meaningful buying in the wake of a modest US Dollar (USD) weakness.

A positive risk tone, bolstered by the optimism over more stimulus from China, keeps the safe-haven Greenback on the defensive below its highest level in more than six months touched last week. Apart from this, bullish Crude Oil prices continue to underpin the commodity-linked Loonie and contribute to keeping a lid on the USD/CAD pair. Against the backdrop of concerns about tighter global supplies, hopes for fuel demand recovery in China – the world's top Oil importer – act as a tailwind for the black liquid.

Traders, however, seem reluctant to place aggressive bearish bets around the USD and prefer to wait on the sidelines ahead of this week's key central bank event risk. The Federal Reserve (Fed) is scheduled to announce its decision at the end of a two-day policy meeting starting on Wednesday and is anticipated to leave interest rates unchanged. The markets, meanwhile, are still pricing in the possibility of one more 25 bps lift-off by the end of this year. Hence, the focus will be on the accompanying policy statement.

Investors will further scrutinise Fed Chair Jerome Powell's remarks at the post-meeting press conference for fresh cues about the Fed's future rate-hike path, which, in turn, will play a key role in influencing the near-term USD price dynamics. In the meantime, the downside for the USD/CAD pair is likely to remain cushioned in the absence of any relevant market-moving economic releases, either from the US or Canada on Monday.

Technical levels to watch