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  • WTI trades with modest daily gains above the $63 handle.
  • US Dollar Index tries to push higher above 98.
  • Markets expect PCE inflation to soften in the U.S.

The USD/CAD pair spent the large portion of the day moving sideways near mid-1.34s before turning north and starting to climb toward the critical 1.35 handle. As of writing, the pair was up 0.17% on a daily basis at 1.3476.

The combination of falling crude oil prices and the broad-based USD strength in the first half of the previous week lifted the pair to its highest level since early January at 1.3521. With the greenback losing its strength following the GDP report on Friday and the barrel of West Texas Intermediate, which dropped to a multi-week low of $62.26, staging a modest recovery, the pair pulled away from its highs.

Nevertheless, the pair’s latest drop seems to be a technical correction rather than a fundamentally-driven one and suggests that it’s unlikely to deepen. Later in the session, the Personal Consumption Expenditure Price Index, the Fed’s favourite measure of inflation, will be looked upon for fresh impetus.

For the loonie, the next significant catalyst will be Statistics Canada’s monthly GDP data on Tuesday. Moreover, Bank of Canada Governor Poloz is scheduled to deliver a speech the same day as well.

Technical levels to watch for

With a daily close above 1.3500 (psychological level), the pair could target 1.3520/30 (Apr. 24 high/Dec. 20, 2018, high) in the near term ahead of 1.3600 (Dec. 21, 2018, high). On the downside, supports are located at 1.3450 (daily low), 1.3425 (Apr. 24 low) and 1.3375 (50-DMA).