• USD/CAD attracts some dip-buying on Thursday and is supported by a combination of factors.
• Softer oil prices undermine the loonie and act as a tailwind amid a pickup in the USD demand.
• Repeated failures to find acceptance above the 1.3200 mark warrant caution for aggressive bulls.
• Traders now await important US macroeconomic releases for some meaningful opportunities.

The USD/CAD pair reverses an intraday dip to mid-1.3100s and climbs to a fresh daily high during the early European session. The pair is currently placed around the 1.3175-1.3180 region and remains well supported by a combination of factors.

Investors remain concerned that a deeper global economic downturn will dent fuel demand. This, to a larger extent, overshadows supply worries and weighs on crude oil prices, which, in turn, seems to undermine the commodity-linked loonie. Apart from this, the emergence of fresh US dollar buying acts as a tailwind for the USD/CAD pair and remains supportive of the modest intraday uptick.

Tuesday's stronger US CPI report reaffirmed expectations that the Fed will stick to its aggressive policy tightening path. In fact, the markets have been pricing in the possibility of a full 1% rate hike at the September FOMC meeting and another supersized 75 rate increase in November. This remains supportive of elevated US Treasury bond yields and continues to lend support to the greenback.

That said, a recovery in the risk sentiment - as depicted by a generally positive tone around the equity markets - might keep a lid on any meaningful gains for the safe-haven buck. Even from a technical perspective, the USD/CAD pair has repeatedly failed to find acceptance above the 1.3200 round-figure mark, warranting some caution before positioning for any further appreciating move.

Market participants now look forward to the US economic docket, featuring the release of monthly Retail Sales, Weekly Initial Jobless Claims, Regional Manufacturing Indices and Industrial Production data. This, along with the US bond yields and the broader risk sentiment, will drive the USD demand. Apart from this, oil price dynamics should provide some impetus to the USD/CAD pair.

Technical levels to watch