USD/CAD remains confined in a range around mid-1.2500s, Canadian CPI awaited

• USD/CAD was seen oscillating in a range through the first half of the European session.
• Bullish USD, weaker oil prices continued lending support and helped limit the downside.
• Investors await Wednesday’s key release of the Canadian CPI report for a fresh impetus.

The USD/CAD pair lacked any firm directional bias and seesawed between tepid gains/minor losses, around mid-1.2500s through the first half of the European session.

The pair struggled to capitalize on the previous day's goodish rebound from levels below the 1.2500 psychological mark and witnessed a subdued/range-bound price action on Wednesday. In the absence of a fresh catalyst, investors preferred to move on the sidelines and wait for today's release of the latest Canadian consumer inflation figures.

Meanwhile, the downside remains cushioned amid a strong bullish sentiment surrounding the US dollar, bolstered by the prospects for an early policy tightening by the Fed. In fact, the markets have been pricing in the possibility for an eventual Fed rate hike move by July 2022 and the Fed fund futures indicate a high likelihood of another raise by November.

Apart from this, a softer tone surrounding crude oil prices undermined the commodity-linked loonie and further extended some support to the USD/CAD pair. WTI crude oil languished near weekly lows and was pressured by Tuesday's API report, which heightened pressure on the Biden administration to release oil from emergency reserves to cap soaring fuel prices.

Nevertheless, the USD/CAD pair, so far, has struggled to gain any meaningful traction and has been oscillating in a range, warranting some caution before placing aggressive directional bets. Apart from the Canadian CPI report, traders on Tuesday will take cues from the US housing market data. This, along with oil price dynamics could provide some impetus.

Technical levels to watch