• USD/CAD consolidates in a range around the 50% Fibo. through the Asian session on Monday.
• The fundamental backdrop favours bullish traders and supports prospects for additional gains.
• A sustained break below the 1.3225 area is needed to negate the near-term positive outlook.

The USD/CAD pair kicks off the new week on a subdued note and oscillates in a narrow band around the 1.3370 area through the Asian session. Spot prices remain below a two-month peak touched on Friday and currently trade around the 50% Fibonacci retracement level of the May-July downfall.

Despite signs that demand for workers in the US was slowing, solid wage growth and a downtick in the unemployment rate pointed to continued tightness in the labour market. This should allow the Federal Reserve (Fed) will keep rates higher for longer and assists the USD to attract some dip-buying on Monday. The Canadian Dollar (CAD), on the other hand, is weighed down by the disappointing release of the domestic jobs report. Furthermore, Crude Oil prices ease from a fresh multi-month top and undermine the commodity-linked Loonie, which, in turn, acts as a tailwind for the USD/CAD pair.

The fundamental backdrop suggests that the path of least resistance for spot prices is to the upside, though bulls might still wait for sustained strength and acceptance beyond the 1.3400 mark, or the 100-day Simple Moving Average (SMA) before placing fresh bets. The USD/CAD pair might then climb to the 1.3445-1.3450 confluence hurdle, comprising the very important 200-day SMA and the 61.8% Fibo. level. The latter should act as a pivotal point, which if cleared will mark a fresh breakout and set the stage for an extension of the recent recovery from sub-1.3100 levels, or the YTD low touched in July.

On the flip side, the 1.3350 area now seems to protect the immediate downside ahead of the 38.2% Fibo. level, around the 1.3300 mark. The subsequent downfall is more likely to attract fresh buying near the 1.3250 horizontal support and remain limited near the 1.3225 region, or the 23.6% Fibo. level. That said, some follow-through selling will negate any near-term positive outlook and make the USD/CAD pair vulnerable to weakening below the 1.3200 mark. Spot prices might then accelerate the fall to the 1.3160-1.3150 intermediate support before eventually dropping to challenge the 1.3100 mark.