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USD/CAD stays in green near 1.34 as WTI drops toward $50

  • Oil sell-off weighs on the loonie in the NA session.
  • US Dollar Index extends slide toward the 97 handles.

Although the greenback came under a broad-based selling pressure in the second half of the day, the USD/CAD pair stayed in the positive territory as the loonie struggled to find demand a fresh crude oil sell-off. As of writing, the pair was trading at 1.3400, adding 0.12% on a daily basis.

Ahead of Wednesday's critical Fed announcements, the US Dollar Index lost its traction on Monday and fell to a daily low of 97.05. Despite a lack of significant macroeconomic data releases from the U.S., a more-than-1% drop witnessed in the 10-year T-bond yield forced the buck to weaken against its rivals. The only data today showed that the manufacturing sector in the NY area lost some momentum in December.

On the other hand, the barrel of West Texas Intermediate, which rose to $51.85 earlier in the day, reversed its course and fell toward the critical $50 mark to not allow the commodity-sensitive loonie to find demand. At the moment, the WTI is down nearly 2% on the day at $50.15.

On Wednesday, the BoC will release its inflation report and the Fed will announce its policy rate decision alongside with the updated rate hike projections for 2019. Ahead of these events, oil prices could remain as the primary driver of the pair's price action.

Technical levels to consider

With a daily close above 1.3400 (daily high/psychological level), the pair could extend its climb toward 1.3445 (Dec. 6 high) and 1.3500 (psychological level). On the downside, supports align at 1.3350 (Dec. 14 low), 1.3290 (Dec. 10 low) and 1.3250 (Dec. 7 low).

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