USD/CAD struggles for a firm intraday direction, consolidates in a range above 1.3700

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• USD/CAD is seen oscillating in a narrow trading band and is influenced by a combination of factors.
• Looming recession risks weigh on Oil prices, which undermines the Loonie and lends some support.
• The Fed’s less hawkish outlook acts as a headwind for the USD and acts as a headwind for the pair.

The USD/CAD pair struggles to gain any meaningful traction on the first day of a new week and oscillates in a narrow trading band through the early part of the European session. The pair is currently placed around the 1.3725 region, nearly unchanged for the day, and for now, seems to have stalled Friday’s retracement slide from levels just above the 1.3800 mark, or a one-and-half-week high.

Despite Russian President Vladimir Putin’s decision to place tactical nuclear weapons in Belarus, worries that a deeper global economic downturn will dent fuel demand and act as a headwind for Crude Oil prices. This, along with expectations that the Bank of Canada (BoC) will refrain from raising interest rates any further, undermines the commodity-linked Loonie and lends some support to the USD/CAD pair. The upside, however, remains capped amid subdued US Dollar (USD) demand, warranting some caution for aggressive bullish traders.

News that First Citizens Bank & Trust Company will buy all of Silicon Valley Bank’s deposits and loans from the Federal Deposit Insurance Corporation (FDIC) calm market nerves about the contagion risk. Moreover, reports that US authorities were in the early stage of deliberation about expanding emergency lending facilities boost investors’ confidence. This is evident from a fresh leg up in the US Treasury bond yields and fails to assist the safe-haven Greenback to capitalize on last week’s solid rebound from its lowest level since February 03.

Apart from this, the Federal Reserve’s signal that it might soon pause the rate-hiking cycle in the wake of the recent turmoil in the banking sector keeps a lid on any meaningful upside for the buck. That said, a further strong follow-through recovery in the US Treasury bond yields, bolstered by easing fears of a full-blown banking crisis, lends some support to the USD. The mixed fundamental backdrop holds back the USD bulls from placing fresh bets and should cap gains for the USD/CAD pair in the absence of any relevant economic data.

Technical levels to watch