USD/CAD holds on to modest gains above 1.28 despite greenback weakness
- Commodity-sensitive loonie struggles to find demand as WTI returns to $54.
- Buck stays under pressure on disappointing tax cut report.
- Pair remains confined in a 50-pip daily range.
On Monday, the USD/CAD pair had a difficult time making a decisive move in either direction and fluctuated in a relatively tight trading band. After easing to a session low at 1.2820 during the American trading hours, the pair found support and turned positive and was last seen trading at 1.2835, up 0.2% on the day.
USD weakness is countered by crude oil retreat
A Bloomberg report on Monday claimed that the US House was considering stretching the Trump administration's 20% corporate tax-cut proposal over a five year period and weighed on the USD, pushing the US Dollar Index to a daily low at 94.38. After the initial reaction to the report, the DXY started to retrace its losses but was still down 0.23% at 94.50 at the time of writing.
- US Dollar tumbles below mid-94s on news of gradual implementation of tax cuts
On the other hand, after advancing to a fresh 8-month high at $54.45, the barrel of West Texas Intermediate lost its bullish momentum and turned negative below the $54 mark, not allowing the pair to take advantage of the lower demand for the buck.
On Tuesday, the economic calendar won't be featuring any critical data from the United States. On the other hand, August monthly GDP growth and Industrial Product Price Index from Canada will be released ahead of the BoC Governor Poloz's speech later in the day.
Technical levels to consider
The pair could encounter the first technical support at 1.2780 (Oct. 26 low) ahead of 1.2635 (Oct. 25 low) and 1.2530 (100-DMA). On the upside, resistances align at 1.2915 (last week's high), 1.2975 (200-DMA) and 1.3015 (Jul. 3 high).The RSI indicator on the daily graph shows overbought conditions as it remains above the 70 mark, suggesting that the pair could have a difficult time rise further before making a technical correction.
- USD/CAD should find resistance around 1.2850 – Scotiabank