USD/CAD sticks to gains near daily high, above mid-1.2900s amid weaker oil prices

• USD/CAD regained positive traction on Monday and reversed a part of Friday’s downfall.
• Retreating crude oil prices undermined the loonie and acted as a tailwind for spot prices.
• The USD was seen consolidating its recent gains and did little to provide a fresh impetus.

The USD/CAD pair held on to its good intraday gains through the early European session and was last seen trading around the 1.2960-1.2965 area, just a few pips below the daily high.

Having shown some resilience below the 1.2900 mark, the USD/CAD pair attracted some buying on the first day of a new week and reversed a part of Friday's slide to a one-week low. Retreating crude oil prices undermined the commodity-linked loonie and extended some support to the major, though subdued US dollar demand kept a lid on any further gains.

Crude oil prices edged lower and snapped a three-day winning streak after shockingly weak Chinese macro data, which fueled worries about faltering global demand. That said, the European Union’s impending ban on Russian crude imports continued driving fears about tightening global supply and acted as a tailwind for the black liquid, at least for now.

On the other hand, the USD was seen consolidating its recent strong gains to a two-decade high and did little to provide any meaningful impetus to the USD/CAD pair. The bias, however, remains tilted in favour of bulls amid expectations that the Fed would tighten its monetary policy at a faster pace to combat stubbornly high inflation.

In fact, markets are pricing in at least a 50 bps Fed rate hike move at the next two policy meetings. Adding to this, mounting global growth concerns resulting from the war in Ukraine and China's zero-COVID-19 policy further underpinned the greenback's reserve currency status. This, in turn, supports prospects for additional gains for the USD/CAD pair.

Market participants now look forward to the release of the US Empire State Manufacturing Index for a fresh impetus later during the early North American session. The data, along with the broader market risk sentiment, will influence the USD demand. Traders will further take cues from oil price dynamics for short-term opportunities around the USD/CAD pair.

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