• USD/CAD attracts some buyers on Monday and is supported by a downtick in Crude Oil prices.
• Elevated US bond yields and a softer risk tone underpin the USD and further lend some support.
• The uncertainty over the Fed’s rate cut trajectory might hold back bulls from placing fresh bets.

The USD/CAD pair ticks higher during the Asian session on the first day of a new week, albeit lacks follow-through buying and remains confined in Friday's broader trading range. Spot prices currently trade just above mid-1.3300s and seem poised to prolong the recent goodish recovery move from a five-month low touched in December.

Crude Oil prices come under some renewed selling pressure in reaction to Saudi Arabia's decision to slash the official selling price (OSP) for February-loading Arab Light to Asia to the lowest level since November 2021. This, in turn, is seen as a key factor undermining the commodity-linked Loonie and acting as a tailwind for the USD/CAD pair. That said, an escalation in the Israel-Hamas conflict, along with continued disruptions in shipping activity in the Red Sea, should help limit any meaningful downside for the black liquid.

Apart from this, subdued US Dollar (USD) price action might hold back traders from placing aggressive bullish bets around the USD/CAD pair and cap the upside. A robust December US jobs report released on Friday, to a larger extent, was offset by the disappointing release of the ISM Non-Manufacturing PMI, which indicated that business activity in the services sector slumped to the lowest level since May. This raises the uncertainty over the Federal Reserve's (Fed) rate cuts trajectory and fails to provide any impetus to the USD.

Meanwhile, Dallas Fed President Lorie Logan noted that if the US central bank does not maintain sufficiently tight financial conditions, there is a risk that inflation will pick back up, reversing progress. This comes after Richmond Fed President Thomas Barkin last week expressed confidence that the economy is on its way to a soft landing and said that rate hikes remain on the table. This remains supportive of elevated US Treasury bond yields, which, along with a fresh leg down in the US equity futures, should benefit the safe-haven buck.

The aforementioned fundamental backdrop seems tilted in favour of the USD/CAD bulls and supports prospects for further gains. Market participants, however, might prefer to wait on the sidelines and look to the latest US consumer inflation figures, due on Thursday before placing fresh directional bets. In the meantime, a scheduled speech by Atlanta Fed President Raphael Bostic, along with the US bond yields and the broader risk sentiment, might influence the USD. Apart from this, Oil price dynamics should provide some impetus to the major