USD/CAD flat-lines below mid-1.3500s, defends 100-day SMA amid bearish Oil prices

• USD/CAD oscillates in a range and is influenced by a combination of diverging forces.
• Weaker Crude Oil prices undermine the Loonie and continue to lend support to the pair.
• A modest USD downtick might hold back bulls from placing fresh bets and cap the upside.

The USD/CAD pair once again finds support near the 100-day Simple Moving Average (SMA) and attracts some buyers near the 1.3530-1.3525 region, or a one-week low touched this Tuesday, though lacks follow-through. Spot prices seesaw between tepid gains/minor losses through the early European session and currently trade around the 1.3535-1.3540 region, nearly unchanged for the day. 

Crude Oil prices remain depressed amid worries that a deeper global economic downturn will dent fuel consumption, which, in turn, weighs on the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair. That said, a modest US Dollar (USD) weakness might hold back bulls from placing aggressive bets and act as a headwind for the major, warranting some caution for aggressive bulls.

The USD downtick comes amid the uncertainty over the Federal Reserve's (Fed) rate-hike path. In fact, the markets have fully priced in another 25 bps lift-off at the end of the two-day FOMC meeting on Wednesday and expect the US central bank to pause its rate-hiking cycle beyond May. That said, the incoming US data keeps alive the possibility of a further hike in June and lends support to the buck.

Hence, the market focus will remain glued to the highly-anticipated FOMC policy decision, scheduled to be announced during the US session on Wednesday. Nevertheless, the aforementioned mixed fundamental backdrop makes it prudent to wait for strong follow-through buying before confirming that the USD/CAD pair's recent pullback from a one-month high touched last Friday has run its course.

Investors will then look to the closely-watched US monthly employment details, popularly known as the NFP report on Friday. Ahead of the key central bank event risk and the US macro data, traders on Tuesday will take cues from the US JOLTS Job Openings data. Apart from this, the US bond yields will drive the USD, which, along with Oil price dynamics, should provide some impetus to the USD/CAD pair.

Technical levels to watch