Following last week’s impressive rally, which caused the pair to record its highest weekly close since May of 2017, the USD/CAD pair started the week quietly amid the choppy action in the FX markets ahead of the Christmas holiday. As of writing, the pair was trading at 1.3579 down 0.23% on the day daily basis. The government shutdown in the U.S. seems to be weighing on the greenback on Monday. Although it’s nothing significant, the US Dollar Index, which tracks the greenback against a basket of six currencies, is recording losses in the day ahead of the day’s only macroeconomic data release, Chicago Fed’s National Activity Index. As of writing, the DXY is down 0.2% on the day at 96.75.
Crude Oil Price Supports Loonie Bulls
On the other hand, hopes of OPEC+ deepening oil output cuts following the United Arab Emirates’ energy minister’s, Suhail al-Mazrouei, comments on Sunday seems to have a provided a small boost to the commodity-sensitive currencies such as the loonie. Nevertheless, the barrel of West Texas Intermediate hasn’t yet staged a rebound but doesn’t extend its losses either. Moving forward the pair is expected to retain its bearish price action in last two trading sessions of the week and first week of January as new congress swears in on January 3, 2019 which is expected to further aggravate tensions in US as the house will stand divided on Trump’s request for funds to build border wall.
When looking from technical perspective, technical indicators on the daily chart point to near-term overbought conditions and seemed to be the only factor keeping a lid on any further up-move. However, any profit-taking slide might attract some dip-buying near 100-hour SMA and should limit the downside near a short-term ascending trend-line. Moreover, oscillators on the 1-hourly chart have also cooled off from overbought conditions and thus, support prospects for an extension of the positive move. The pair could face the initial resistance at 1.3600 ahead of 1.3670 and 1.3720 handles to the upside while on the downside support is available at 1.3500-1.3490 followed by 1.3445 and 1.3410 handles respectively.
This article was originally posted on FX Empire
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