USD/CAD started the week on a positive note, in part because crude oil prices declined for the second day in a row, as the global economic downturn affected fuel demand.
Concerns also arose after underwhelming macroeconomic data from China and the resumption of oil production in Libya over the weekend.
On the other hand, dollar demand surged, thanks to optimistic US data released on Friday. According to the report, consumer confidence in July hit its highest level since September 2021. However, the acknowledgment that the Fed will maintain interest rates unchanged for the rest of the year, following the expected 25-basis-point increase in July, kept dollar bulls from aggressive buying, restraining the growth potential of the pair.
Most likely, tomorrow's data on the Empire State Manufacturing Index will impact market direction, in which a broader risk-on sentiment will stimulate demand for dollar and likely provide some impetus. Meanwhile, the dynamics of oil prices will favor short-term opportunities in USD/CAD.
Inflation data in Canada will also play a key role in determining the Bank of Canada's next policy move and the next phase of price movements.
Therefore, market players should not strive for uncertain risks, waiting for specific data instead to understand the direction of the pair.