USD/CAD consolidates in a range, just above multi-week low amid Middle East tensions

• USD/CAD seesaws between tepid gains/minor losses during the Asian session on Monday.
• Friday’s unimpressive Canadian jobs report weighs on the CAD and lends support to the pair.
• Middle East tensions benefit Oil prices, underpin the Loonie and cap gains for spot prices.

The USD/CAD pair extends its consolidative price move on the first day of a new week and is influenced by a combination of diverging forces. Spot prices currently trade with a mild positive bias, around the 1.3735 region, though remain well within the striking distance of a multi-week low touched on Friday. 

The mixed Canadian jobs data released on Friday is seen weighing on the domestic currency, which, along with a modest US Dollar (USD) uptick, acts as a tailwind for the USD/CAD pair. Statistics Canada reported that the number of employed people decreased by 2.8K in July, while the Unemployment Rate held steady at 6.4% and Average Hourly Wages rose by 5.2% from a year earlier. Nevertheless, the data reaffirmed market bets for another 25 basis point (bps) rate cut by the Bank of Canada (BoC) in September and undermines the Canadian Dollar (CAD).

The US Dollar (USD), on the other hand, attracts some haven flows in the wake of rising geopolitical tensions and turns out to be another factor lending some support to the USD/CAD pair. That said, bets for bigger interest rate cuts by the Federal Reserve (Fed) hold back the USD bulls from placing aggressive bets. Adding to this, the risk of supply disruptions from the Middle East – amid the risk of a broader conflict in the region – assists Crude Oil prices to hold steady near a one-week peak, which lends some support to the commodity-linked Loonie and caps the pair.

In the absence of any relevant market-moving economic releases on Monday, either from the US or Canada, the aforementioned fundamental backdrop warrants some caution before positioning for any meaningful gains. Traders also seem reluctant and prefer to wait for this week's release of inflation figures from the US – the Producer Price Index (PPI) and the Consumer Price Index (CPI) on Tuesday and Wednesday, respectively.