USD/CAD struggles to pull away from 1.31 as focus shifts to Canadian election

• US Dollar Index fails to make a meaningful recovery on Monday.
• Crude oil prices push lower to help the pair limit its losses.
• Canadians head  to the polls for the 43rd general election.

The USD/CAD pair dropped below the 1.31 handle for the first time in nearly three months on Monday and has gone into a consolidation phase as markets are waiting for the outcome of the 43rd Canadian general election. As of writing, the pair was trading at 1.3102, losing 0.17% on a daily basis.

Persistent USD weakness weighs on the pair

The selling pressure surrounding the Greenback last week weighed on the pair and caused it to close in the negative territory on the weekly chart for the second straight week.

After erasing 1.2% last week, the US Dollar Index, which tracks the USD’s value against a basket of six major currencies, staged a technical recovery in the absence of significant macroeconomic data releases on Monday but failed to help the pair gain traction.

On the other hand, crude oil prices are staying under modest pressure at the start of the week with the barrel of West Texas Intermediate trading a little above the $53 mark and losing around 1% on the day to make it difficult for the commodity-sensitive loonie to gather strength.

Nevertheless, the USD/CAD pair seems to be staying directionless while investors are waiting for the election results. Previewing the election, “Polls have tightened over the last month which (likely) puts a majority out of reach for both major parties,” said TD Securities analysts. “Most polling stations will close at 21:30 ET, but with several toss ups on the west coast it is unlikely we will know the final results before BC polls close at 22:00 ET.”

Technical levels to watch for