USD/CAD maintains modest intraday recovery, lacks continuation above 1.3350

• USD/CAD is recovering slightly from the more than two-month lows reached this Monday.
• A softer tone around crude oil prices weighs on the CAD and acts as a tailwind for the pair.
• USD weakness prevents bulls from opening aggressive positions and limits the pair’s further upside.

The pair USD/CAD attracts some buyers near the 1.3300 level and has a nice intraday bounce from the lows of more than two months reached this Monday. The pair maintains the rally during the first half of the European session and is currently near the upper end of the daily range, just below the 1.3350 zone.

Crude oil prices remain under pressure for the second day in a row, which in turn weighs on the CADa currency linked to commodity prices, and acts as a tailwind for the USD/CAD pair. Increased crude exports from Russian Baltic ports in early February largely offset optimism about a recovery in demand from China. Furthermore, expectations that OPEC+ will likely keep production unchanged during a meeting this week weigh on the price of black gold.

For his part, USD/CAD upside looks limited amid underlying bearish sentiment around the US dollar. Prospects for less aggressive monetary policy tightening by the Fed keep USD bulls on the back foot near the nine-month low reached last week. Traders, however, seem reluctant, preferring to stay on the sidelines ahead of the expected FOMC monetary policy decision, which is due to be announced at the end of a two-day meeting on Wednesday.

In the absence of market-relevant economic releases in both the US and Canada on Monday, the aforementioned fundamental background warrants caution before entering directional positions. However, the USD/CAD pair manages to stay above the 1.3300 level for now and remains at the mercy of dollar and oil price dynamics. Such an area could act as a key point, which if broken decisively, would pave the way for a short-term move lower.

USD/CAD technical levels