• USD/CAD attracts some dip-buying on Monday amid a strong follow-through USD buying.
• An uptick in oil prices underpins the Loonie and caps any meaningful upside for the major.
• The fundamental backdrop still favours bulls and supports prospects for additional gains.

The USD/CAD pair reverses an intraday dip to sub-1.3400 levels and climbs to a four-day high during the first half of trading action on Monday. Spot prices, however, struggle to capitalize on the move and remain below mid-1.3400s through the early North American session.

The US Dollar builds on Friday's solid bounce from a nine-month low and gains strong follow-through traction, which, in turn, acts as a tailwind for the USD/CAD pair. The upbeat US monthly employment details pointed to the underlying strength in the labor market and fueled speculations that the Fed will keep hiking interest rates to tame inflation. This continues to push the US Treasury bond yields higher and underpins the buck.

Meanwhile, expectations that the US central bank will stick to its hawkish stance for longer, along with fears of worsening US-China relations, take its toll on the global risk sentiment. This is evident from a sea of red across the equity markets, which is seen as another factor benefitting the safe-haven greenback. That said, an uptick in oil prices underpins the commodity-linked loonie and keeps a lid on any further gains for the USD/CAD pair.

Turkey's oil terminal in Ceyhan halted after a major earthquake struck nearby early on Monday. This, along with price caps on Russian products that took effect on Sunday, raises supply concerns and provides a modest lift to oil prices. That said, the uncertainty about a strong recovery in the Chinese economy and looming recession risks might hold back bulls from placing aggressive bets around the black liquid, at least for the time being.

This, in turn, favours the USD/CAD bulls and supports prospects for a further near-term appreciating move. Hence, some follow-through strength beyond last week's swing high, around the 1.3470 area, looks like a distinct possibility. The momentum could get extended further towards the 1.3500 psychological mark en route to a technically significant 100-day SMA support breakpoint, now turned resistance, currently around the 1.3525-1.3530 region.

Technical levels to watch