USD/CAD recovers to 1.31 area, struggles to find direction

• US Dollar Index steadies below 96.50.
• WTI clings to daily gains above $63 on Monday.

After moving sideways in a narrow channel above the 1.31 mark during the first half of the day, the USD/CAD pair came under a bearish pressure and fell to the 1.3070 area. However, the pair staged a rebound in the last couple of hours to turn flat on the day near 1.3110.

With the U.S. sanctions against Iran going into effect today, crude oil prices started the week on a positive note and recovered a portion of the heavy losses they suffered last week. Following the initial rebound to a daily high of $64.10, the barrel of West Texas Intermediate lost some momentum and was last seen trading at $63.50, making it difficult for the commodity-sensitive loonie to stay resilient against the greenback.

Meanwhile, the BoC Governor Polo delivered a speech earlier today and reiterated that the bank needed to continue to raise rates to keep the inflation close to the target level. Regarding the trade issues, Poloz said that the risks were two-sided to repeat his view from the BoC’s last press conference.

On the other hand, today’s data from the United States showed that the business activity in the non-manufacturing sector expanded at a higher-than-expected pace in October. Despite these data, the US Dollar Index failed to stay in the green as falling T-bond yields ahead of tomorrow’s midterm elections in the U.S. weighed on the demand for the buck. At the moment, the DXY is down 0.05% on the day at 96.45.

Technical levels to consider

The pair could face the next technical resistance at 1.3165 (Nov. 1 high) ahead of 1.3200 (psychological level/Sep. 10 high) and 1.3225 (Sep. 6 high). On the downside, supports could be seen at 1.3050 (100-DMA), 1.3015 (50-DMA) and 1.2985 (200-DMA).