USD/CAD in search of a firm direction, stuck in a range below 1.3400 handle

   •  The USD bulls held on the defensive amid uncertainty over the Fed’s policy outlook.
   •  Subdued oil price action does little to influence Loonie and provide any impetus.

The USD/CAD pair lacked any firm directional bias and was seen oscillating in a narrow trading band below through the early European session.

The pair continued with its struggle to build on the momentum further beyond the 1.3400 handle and was now weighed down by a modest follow-through US Dollar retracement from 1-1/2 year tops.

Despite Friday's better than expected US monthly retail sales data, uncertainty over the Fed's rate hike path in 2019 kept the USD bulls on the defensive and turned out to be one of the key factors exerting some downward pressure on the first day of a new trading week. 

However, a subdued price action around oil markets did little to provide any additional boost to the commodity-linked currency - Loonie and might help limit any deeper losses ahead of this week's key event risk - the latest FOMC monetary policy update. 

With a 25bps rate hike largely priced in the market, the near-term USD trajectory will be guided by the Fed's forward guidance and eventually help investors determine the pair's next leg of a directional move. 

In the meantime, the USD price dynamics might continue to act as an exclusive driver of the pair's momentum amid absent relevant market moving economic releases, either from the US or Canada.

Technical levels to watch

On a sustained move beyond the 1.3400 handle, the pair is likely to aim towards retesting 18-month tops, around the 1.3445 region. On the flip side, the 1.3355-50 region might continue to protect the immediate downside, which if broken might prompt some additional long-unwinding trade and drag the pair further towards challenging the 1.3300 round figure mark.