• USDCAD bounces off the 100 DMA support and is supported by a combination of factors.
• Falling oil prices undermine the Loonie and act as a tailwind amid a solid USD rebound.
• Bets for less aggressive Fed rate hikes might cap any further gains for the buck and the pair.

The USDCAD pair stages a modest recovery from the 100-day SMA support, around the 1.3240-1.3235 region and recovers a major part of Friday's losses to a nearly two-month low. The pair sticks to its intraday gains through the early North American session and is hovering around the 1.3300 mark.

Crude oil prices fell nearly 1.5% on the first day of a new week after OPEC lowered its forecast for 2022 global oil demand growth for the fifth time since April. This, in turn, undermines the commodity-linked Loonie, which, along with resurgent US Dollar demand, acts as a tailwind for the USDCAD pair.

The US Treasury bond yields regain positive traction in reaction to more hawkish comments by Federal Reserve Governor Christopher Waller on Sunday. During a conversation in Sydney, Australia, Waller noted that markets have overreacted to the softer October consumer price inflation last week.

Waller added that the US central bank was not softening its fight against inflation, and it will take a string of soft CPI reports for the Fed to take its foot off the brakes. Apart from this, a softer risk tone provides an additional lift to the safe-haven buck and continues to push the USDCAD pair higher.

That said, the latest optimism over an eventual scaling back of COVID-19 measures in China could help limit losses for crude oil prices. Apart from this, rising bets for less aggressive rate hikes by the Fed seem to cap any further gains for the buck and the USDCAD pair, at least for the time being.

In the absence of any major market-moving macro data, the fundamental backdrop warrants some caution before positioning for an extension of the intraday move up. This, in turn, makes it prudent to wait for strong follow-through buying before confirming that the USDCAD pair has formed a bottom.

Technical levels to watch