USD/CAD flirts with one-month peak amid bearish oil and stronger USD, BoC awaited

• USD/CAD holds steady near a one-month top and draws support from a combination of factors.
• Bearish oil prices continue to undermine the Loonie and act as a tailwind amid a stronger USD.
• Bulls, however, seem reluctant and prefer to wait for the BoC decision before placing fresh bets.

The USD/CAD pair oscillates in a narrow trading band near mid-1.3600s on Wednesday and consolidates its recent gains to a one-month high touched the previous day.

Traders now seem reluctant to place aggressive bets and prefer to wait on the sidelines ahead of the latest monetary policy update from the Bank of Canada (BoC). The Canadian central bank is scheduled to announce its decision later during the early North American session and is widely expected to hike interest rates by 50 bps. The focus, meanwhile, will be on the accompanying rate statement, which will influence the domestic currency and provide some meaningful impetus to the USD/CAD pair.

In the meantime, a combination of factors continues to act as a tailwind for spot prices and limits a modest intraday downtick to the 1.3630 area. Crude oil prices remain depressed for the fourth straight day and languished near the YTD low amid worries that a deeper global economic downturn will hurt fuel demand. This, in turn, is seen undermining the commodity-linked Loonie and lending support to the USD/CAD pair amid some follow-through US Dollar buying, bolstered by hawkish Fed expectations.

Friday's better-than-expected US jobs report (NFP), especially an upside surprise in wage growth data, points to the possibility of a further rise in inflationary pressures. Adding to this, the upbeat US ISM Services PMI released on Monday suggested that the economy remained resilient despite rising borrowing costs. This, in turn, fuels speculations that the Fed might lift rates more than projected, which lends support to the buck and adds credence to the positive outlook for the USD/CAD pair.

Hence, any meaningful corrective pullback is more likely to attract fresh buyers and remain limited. The USD/CAD pair seems poised to prolong its recent upward trajectory and aim to reclaim the 1.3700 round-figure mark. The positive momentum could get extended towards the next relevant barrier, around the 1.3740 supply zone.

Technical levels to watch