USD/CAD trims intraday gains, pulls back towards 1.3150 amid oil rally

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  • USD/CAD trims some of its intraday gains, although the decline remains muted.
  • Rising oil prices underpin the loonie and act as a headwind amid a modest USD pullback.
  • Aggressive Fed rate hike bets favor USD bulls and should support the pair.

The pair USD/CAD is supported by Friday’s bounce from the 1.3075 area and starts the new week on a positive note. However, the pair finds it difficult to capitalize on the move and trims some of its strong intraday gains, pulling back towards 1.3150 during the first half of the European session.

Expectations that OPEC+ producers will cut output to support prices at a meeting on Monday are driving crude prices higher. This, in turn, boosts the commodity-linked loonie and acts as a headwind for the USD/CAD pair. Aside from this, a modest US dollar retracement from a fresh two-decade high attracts some sellers near the 1.3175 area.

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Signs of a recovery in risk sentiment – as evidenced by the generally positive tone in equity markets – prompt some profit-taking around the safe-haven dollar. However, concerns about the deepening of the global economic recession should dampen optimism. This, coupled with aggressive expectations from the Fed, should help limit any significant corrective decline in the dollar.

Despite the monthly US employment report, investors seem convinced that the Federal Reserve will continue its aggressive tightening policy. In fact, markets are pricing in a 75 basis point rate hike at the next FOMC meeting on September 20-21. This continues to support elevated US Treasury yields and favors dollar bulls.

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The fundamental backdrop suggests that the path of least resistance for the USD/CAD pair is to the upside and any significant pullback could still be seen as a buying opportunity. However, traders may refrain from making aggressive bets ahead of the OPEC meeting and amid relatively thin trading volume due to the US Labor Day holiday.

Technical levels

USD/CAD

Panorama
Last Price Today 1.3148
Today’s Daily Change 0.0016
Today’s Daily Change % 0.12
Today’s Daily Opening 1.3132
Trends
20 Daily SMA 1.2957
50 Daily SMA 1.2932
100 Daily SMA 1.2867
200 Daily SMA 1.2777
levels
Previous Daily High 1,317
Previous Daily Minimum 1.3075
Previous Maximum Weekly 1.3208
Previous Weekly Minimum 1.2972
Monthly Prior Maximum 1.3141
Previous Monthly Minimum 1.2728
Daily Fibonacci 38.2% 1.3111
Daily Fibonacci 61.8% 1.3134
Daily Pivot Point S1 1.3082
Daily Pivot Point S2 1.3031
Daily Pivot Point S3 1.2987
Daily Pivot Point R1 1.3176
Daily Pivot Point R2 1.3221
Daily Pivot Point R3 1.3271

Source: Fx Street

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