- USD/CAD trades in a tight range amid liquidity conditions due to Monday’s holiday.
- However, a combination of factors continues to act as a tailwind and limits downgrades.
- Pullback in oil prices weakens the loonie and lends support amid sustained USD buying.
The pair USD/CAD has difficulty gaining traction on Monday and swings between tepid gains and small losses during the early American session. However, the pair manages to hold above the 1.3700 signal and is supported by a combination of factors.
Crude oil prices slipped, snapping a five-day winning streak to hit the highest level since late August, amid concerns that a deeper global economic downturn will hit fuel demand. This, in turn, undermines the commodity-linked loonie and acts as a tailwind for the USD/CAD pair amid underlying bullish sentiment surrounding the US dollar.
Indeed, the dollar index, which measures the greenback against a basket of currencies, is near a 1-1/2-week high amid Fed expectations. Market traders seem convinced that The US central bank will continue to tighten monetary policy at a faster pace and have been eyeing another 75 basis point rate hike in November.
Bets were bolstered by monthly US employment data released on Friday, which pointed to the strength of the economy. Apart from this, concerns about a deeper global economic recession, a new escalation in the conflict between Russia and Ukraine and new trade fears between the US and China continue to benefit the dollar, which is a safe haven.
However, tight liquidity after the US and Canada holiday prevents the bulls from placing aggressive bets on the USD/CAD pair. Furthermore, investors prefer to wait for a new catalyst with the release of the FOMC meeting minutes on Wednesday, which will be followed by the latest US consumer inflation figures on Thursday.
Technical levels to watch
Source: Fx Street
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