• USD/CAD struggles to capitalize on its modest intraday gains to over a one-month high.
• An uptick in crude oil prices underpins the loonie and acts as a headwind for spot prices.
• Hawkish Fed expectations, the risk-off mood boosts the USD and limits the downside.

The USD/CAD pair retreats from over a one-month high touched earlier this Monday and drops to the 1.2980-1.2975 area, closer to the daily low during the first half of the European session.

A modest uptick in crude oil prices underpins the commodity-linked loonie, which, in turn, is seen as a key factor acting as a headwind for the USD/CAD pair. Concerns that the European Union embargoes on Russian oil imports could tighten supply offer support to the black liquid. That said, efforts to revive Iran's nuclear deal and worries about a global economic downturn could cap any meaningful gains for the commodity. Apart from this, sustained US dollar buying should help limit the downside for the major, at least for the time being.

Firming expectations that the Fed will retain its aggressive policy tightening path remains supportive of the ongoing USD rally to its highest level since mid-July. Apart from this, the prevalent risk-off environment further drove some haven flows towards the greenback. Growing recession fears continue to weigh on investors' sentiment, which is evident from a generally weaker tone around the equity markets and boosts demand for safe-haven assets. This, in turn, supports prospects for the emergence of some dip-buying around the USD/CAD pair.

Furthermore, traders might also prefer to wait for Fed Chair Jerome Powell's speech at the Jackson Hole Symposium on Friday. Apart from this, traders this week will take cues from important US macro data. This, in turn, should influence the USD demand and provide a fresh directional impetus to the USD/CAD pair. In the meantime, absent relevant economic releases on Monday, either from the US or Canada, should hold back investors from placing aggressive bets.

Technical levels to watch