USD/CAD struggles to recover above 1.27 as USD weakness persists
- DXY starts the week under pressure, edges lower to mid-92s.
- Crude oil makes a technical correction following last week's rally.
- New home sales data from the United States is coming up next.
After closing the previous week with an 80-pip loss, the USD/CAD pair started the new week on a negative note and broke below the 1.27 handle. As of writing, the pair was trading at 1.2682, losing 0.24% on the day.
With no new fundamental drivers that could help the greenback regain its lost strength against its major rivals, the US Dollar Index continued to push lower in the first half of the day and refreshed its lowest level in three months 92.42. At the moment, the index is at 92.44, losing 0.3% on the day. Later in the session, the US Census Bureau is going to release the new home sales data, which is expected to contract by 6.3% on a monthly basis in October. However, even a better-than-expected reading is unlikely to allow the index make a meaningful recovery as investors remain on edge waiting for developments surrounding the tax reform.
In the meantime, after refreshing its highest level in more than two years above the $59 mark, the barrel of West Taxes Intermediate went into a consolidation phase ahead of the critical OPEC meeting on Thursday and was last seen trading at $58.30, down 1.05% on the day. The commodity-sensitive loonie could have a difficult time extend its earnings against the buck if crude oil prices continue to edge lower in the near term.
With today's drop, the RSI indicator on the daily graph turned south below the 50 mark, suggesting that the bearish momentum is building up. On the downside, the pair could encounter the initial support at 1.2660 (50-DMA) ahead of 1.2560 (100-DMA) and 1.25 (psychological level). On the upside, resistances could be seen at 1.2730 (daily high/20-DMA) followed by 1.2835 (Nov. 21 high) and 1.2915 (Oct. 31 high).