USD/CAD holds above 1.2900 as crude oil trades deep in red

• USD/CAD is trading in the positive territory above 1.2900 on Monday.
• Crude oil prices are falling sharply amid worsening demand outlook.
• US Dollar Index consolidates Friday's losses around 96.50.

Following Friday's upsurge, the USD/CAD pair started the new week on a firm footing and came within a couple of pips of the multi-month high it set at 1.2938 last week. As of writing, the pair was up 0.25% on a daily basis at 1.2917.

Slumping oil prices hurt CAD

The sharp decline witnessed in crude oil prices seems to be weighing on the commodity-sensitive loonie on Monday. The barrel of West Texas Intermediate was last seen losing nearly 3% on the day at $68,35 as investors are pricing a worsening energy demand outlook amid the surging number of Omicron cases and tighter restrictions globally.

On the other hand, the US Dollar Index, which gained 0.7% on Friday, is consolidating its gains around 96.50, limiting USD/CAD's upside for the time being. 

In the second half of the day, investors will remain focused on risk perception and crude oil prices as the North American economic docket won't be featuring and high-tier data releases.

Meanwhile, Wall Street's main indexes look to open sharply lower with S&P Futures losing more than 1% ahead of the opening bell. In case markets remain risk-averse, USD/CAD should not have a hard time holding in the positive territory. 

Technical levels to watch for