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USD/CAD continues to move sideways near 1.31

  • US Dollar Index steadies in the positive territory near 96.
  • WTI loses recovery momentum ahead of $70.
  • Markets await the BoC’s rate decision on Wednesday.

The USD/CAD is moving in a very narrow band on Monday as investors refrain from making large bets ahead of this week’s critical BoC announcements. As of writing, the pair was virtually  unchanged on the day at 1.3105.

After suffering  heavy losses last week, crude oil prices staged a recovery earlier today to help the commodity-sensitive loonie stay strong against its rivals. However, pressured by  Iran’s Oil Minister Bijan Zangeneh’s comments that suggested the oil output from Saudi Arabia and Russia nearing record highs, oil reversed its course and the barrel of WTI dropped below $69 to limit any potential losses the pair may have recorded. At the moment, the barrel of WTI is down 0.65% on the day at $68.80.

On the other hand, despite the disappointing data from the Chicago Fed, the US Dollar Index sticks to daily gains a little below the 96 mark. The National Activity Index of the Chicago Fed fell to 0.17 in September from 0.27 in August to miss the analysts’ estimate of 0.22.

With the latest inflation data from Canada disappointing to the downside last week, markets will be paying extra attention to this Wednesday’s BoC meeting.  “Markets are somewhat cautious on the timing of BoC policy hikes next year, pricing in just 2 ½ hikes for all of 2019, yet the economy is operating close to full employment, inflation is on target and NAFTA cancellation risk has been all but eliminated, lifting a considerable cloud of uncertainty,” Westpac analysts said in a recently published report.

Technical levels to consider

The initial support for the pair aligns at 1.3050 (100-DMA) ahead of 1.3000 (psychological level) and 1.2975 (200-DMA). On the upside, resistances are located at 1.3130 (Oct. 19 high), 1.3180 (Sep. 11 high) and 1.3225 (Sep. 6 high).

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