USD/CAD drops to mid-1.30s as WTI recovers to $70

• Crude oil stages strong recovery on Monday.
• US Dollar Index stays in the negative territory ahead of data releases.

After spending the first half of the day moving sideways around the 1.3070 mark, the USD/CAD pair came under a modest pressure in the last hours as the commodity-linked loonie gathered strength on rising crude oil prices. As of writing, the pair was down 0.08% on the day at 1.3050.

The barrel of West Texas Intermediate dropped sharply on Friday to erase the majority of the gains that it recorded in the previous week. However, easing trade tensions and the strong economic growth in the United States allowed investors to focus on the demand side and helped crude oil to gain traction on Monday. The barrel of WTI rose above the $70 handle for the first time in two weeks and was last seen trading a couple of cents below that level, where it was 1.45% on the day.

In the meantime, the greenback is staying relatively quiet on Monday as investors move to the sidelines ahead of the critical FOMC announcements on Wednesday. At the moment, the US Dollar Index is down 0.14% on the day at 94.53. Later in the session, pending home sales and Dallas Fed’s manufacturing index will be released, which are unlikely to receive a noteworthy reaction from the markets.

Technical levels to consider

The initial resistance for the pair could be seen at 1.3125 (20-DMA/50-DMA) ahead of 1.3160 (Jul. 19 high) and 1.3200 (psychological level). On the downside, supports align at 1.3025 (Jul. 25 low), 1.3000 (psychological level) and 1.2965 (100-DMA).