- USD/CAD pair failed to capitalize on Friday’s goodish intraday positive move.
- A pickup in oil prices underpinned the loonie and capped any meaningful upside.
- The prevailing bullish sentiment around the USD seemed to help limit the downside.
The USD/CAD pair remained on the defensive through the early European session on Monday, albeit held well within the previous session’s broader trading range.
The pair failed to capitalize on Friday’s intraday positive move and once again failed near the 1.3070-75 supply zone amid a goodish pickup in crude oil prices, which tend to underpin demand for the commodity-linked currency – the loonie.
Traders preferred to stay on the sidelines
Oil prices climbed over 1% on the first day of a new trading week amid concerns over output and exports from key OPEC producers. Iraq temporarily stopped output at an oil field on Sunday while political unrest has reemerged in Libya.
Supply from the second site in Iraq is at risk as widespread unrest escalates in OPEC’s second-biggest producer. In Libya, National Oil Corp. declared force majeure after Commander Khalifa Haftar blocked exports at ports under his control.
On the other hand, the US dollar remained well supported by expectations that the US economy will continue to expand and reduced odds of any further interest rate cuts by the Fed, which eventually helped limit the downside, at least for now.
Moreover, investors also seemed reluctant to place any aggressive bets on the back of a holiday in the US and might prefer to stay on the sidelines ahead of the key event risk – the latest BoC monetary policy update on Wednesday.
The fundamental set-up points to an extension of the pair’s range-bound price action, making it prudent to wait for a sustained move in either direction before traders start positioning for the near-term trajectory.
Technical levels to watch