USD/CAD: On the defensive, just above mid-1.3100s

• A combination of factors failed to provide any meaningful impetus to USD/CAD on Monday.
• The US fiscal impasse, sliding US bond yields held the USD bulls from placing aggressive bets.
• A modest uptick in oil prices underpinned the loonie and further collaborated towards capping.

The USD/CAD pair remained on the defensive through the Asian session and was last seen trading near the lower end of its daily range, just above mid-1.3100s. The pair lacked any firm directional bias and was seen oscillating in a range on the first day of a new trading week. The upside remained capped in the wake of a softer tone surrounding the US dollar, which struggled to capitalize on last week's attempted bounce from the lowest level since April 2018. The impasse over the next round of the US fiscal stimulus measures, along with growing concerns about the US economic recovery has been fueling speculations for additional monetary easing by the Fed. This coupled with the upbeat market mood further undermined the greenback's safe-haven status. Meanwhile, a modest uptick in crude oil prices extended some support to the commodity-linked currency – the loonie – and exerted some pressure on the USD/CAD pair. Oil prices were supported after producers shut production ahead of tropical storms that are forecast to grind up the Gulf of Mexico in coming days. However, the downside is likely to remain limited as investors might be reluctant to place any aggressive directional bets ahead of the Fed Chair Jerome Powell's scheduled speech during the Jackson Hole symposium later this week. Powell's remarks will be closely scrutinized for clearer guidance on the central bank's policy outlook and influence the near-term USD price dynamics, providing a fresh directional impetus to the USD/CAD pair. In the meantime, the pair seems more likely to continue with its range-bound trading action amid absence absent relevant market-moving economic releases – either from the US or Canada.

Technical levels to watch