USD/CAD struggles below 1.3800 amid rebounding Oil prices, stronger USD lends support

• USD/CAD drifts lower for the third straight day, albeit lacks follow-through.
• An uptick in Oil prices underpins the Loonie and exerts pressure on the pair.
• A goodish pickup in the USD demand to lend some support and limit losses.

The USD/CAD pair sticks to its modest intraday losses during the early European session on Wednesday and currently trades around the 1.3775-1.3770 region. Spot prices, however, manage to hold above a two-week low touched on Tuesday, warranting some caution before positioning for an extension of this week's sharp retracement slide from the vicinity of mid-1.3900s, or a nearly two-year high. 

Crude Oil prices gain some positive traction and for now, seem to have snapped a four-day losing streak to the lowest level since early February. This, in turn, is seen underpinning the commodity-linked Loonie and exerting some downward pressure on the USD/CAD pair for the third straight day. That said, concerns about an economic downturn in the US and China – the world's two largest economies – act as a headwind for the black liquid.

Apart from this, a goodish pickup in the US Dollar (USD) demand, bolstered by an uptick in the US Treasury bond yields, turns out to be another factor lending some support to the USD/CAD pair. Meanwhile, a generally positive tone around the equity markets, along with dovish Federal Reserve (Fed) expectations, might hold back the USD bulls from placing aggressive bets and support prospects for some meaningful downside for spot prices. 

The aforementioned mixed fundamental backdrop, however, warrants some caution before placing aggressive directional bets in the absence of any relevant market-moving US economic data on Wednesday. Traders might also prefer to wait on the sidelines ahead of the monthly Canadian employment details, due for release on Friday. In the meantime, the USD/Oil price dynamics should produce short-term trading opportunities around the USD/CAD pair.