USD/CAD stretches higher to 1.3230 area as crude oil continue to slide

• Barrel of West Texas Intermediate (WTI) loses more than 3% on Monday.
• US Dollar Index steadies near the 98.50 handle.
• The pair is likely to stay in a consolidation phase in the second half of the day.

Despite the subdued trading action on Monday amid the Columbus Day holiday in the United States (US) and the Thanksgiving Day holiday in Canada, the USD/CAD pair inched higher on Monday as the sharp drop witnessed in crude oil prices weighed on the commodity-related Loonie. As of writing, the pair was trading at 1.3227, adding 0.24% on a daily basis.

Crude oil turns south on Monday

Heightened geopolitical tensions in the Middle East and the uncertainty surrounding the “phase one” trade deal that the US reached with China on Friday caused crude oil prices to start the week under heavy selling pressure.

After gaining more than $2 in the second half of the week, the barrel of West Texas Intermediate (WTI) erased almost all of last week’s gains and was last seen trading at $52.90, down 3.4% on the day.

Commenting on the trade war developments, “there is a five-week period for the two sides to write down exactly what they agreed to in the meeting. This raises questions about how much “progress” has really been made,” said ING analysts. “We think there are probably some important disagreements on the terms of a deal, which could include the yuan mechanism.”

On the other hand, the poor performance of major European currencies at the start of the week allows the Greenback to find demand and help the pair cling to its daily gains. The US Dollar Index, which tracks the USD’s value against a basket of six major currencies, is looking to finish the day with modest gains near the 98.50 handle.

Technical levels to watch for