USD/CAD steadily climbs back closer to mid-1.3700s, upside potential seems limited

The USD/CAD pair attracts some dip-buying on the first day of a new week, albeit lacks follow-through and remains confined in a familiar range held over the past week or so. Spot prices currently trade just below mid-1.3700s, up less than 0.10% for the day amid a combination of diverging forces. 

Crude Oil prices declined on Monday and eroded a part of last week's strong gains amid concerns about a weaker US consumer demand, which is seen undermining the commodity-linked Loonie. The US Dollar (USD), on the other hand, holds steady near its highest level since early May touched on Friday in the wake of the Federal Reserve's (Fed) hawkish surprise, forecasting only one rate cut in 2024. This is seen as another factor acting as a tailwind for the USD/CAD pair.

Meanwhile, weaker-than-expected US consumer and producer prices data released last week suggests that inflation is subsiding. Moreover, an unexpected fall in the US import prices further boosted the domestic inflation outlook. This, along with a sharp deterioration in the US consumer sentiment in June, keeps the first Fed rate cut move in September on the table. This holds back the USD bulls from placing aggressive bets and might cap the upside for the USD/CAD pair. 

Hence, it will be prudent to wait for strong follow-through buying before positioning for a further near-term appreciating move for the currency pair. Traders now look forward to Monday's economic docket, featuring the release of Canadian Housing Starts data and the Empire State Manufacturing Index from the US later during the North American session. This, along with Oil price dynamics, should assist traders to grab short-term opportunities around the USD/CAD pair.