USD/CAD turns flat, around 1.3175 level amid a sharp pullback in oil prices

• USD/CAD lacked any firm directional bias and remained confined in a range on Monday.
• The USD remained depressed and capped the pair below the 1.3200 round-figure mark.
• A turnaround in crude oil prices undermined the loonie and helped limit deeper losses.

The USD/CAD pair seesawed between tepid gains/minor losses through the early European session and was last seen trading in the neutral territory, around the 1.3175-70 region.

A combination of diverging forces failed to provide any meaningful impetus to the major, instead led to a subdued/range-bound price action on the first day of a new trading week. The prevalent selling bias surrounding the US dollar capped the upside, while a pullback in oil prices undermined the commodity-linked loonie and helped limit any deeper losses.

The USD remained depressed on the back of fading hopes for the next round of the US fiscal stimulus measures. Adding to this, a strong rally in the equity markets further undermined the greenback's relative safe-haven status. The global risk sentiment got a strong boost from renewed optimism over a potential vaccine for the highly contagious COVID-19.

It is worth reporting that AstraZeneca announced to resume the phase-3 trials for its coronavirus vaccine candidate. Adding to this, Pfizer also announced the likelihood of presenting late-stage data for its own vaccine by late October. Weaker USD exerted some pressure on the USD/CAD pair through the early part of the trading action on Monday.

However, a sharp intraday turnaround in crude oil prices, now down over 1% for the day, extended some support, rather assisted the USD/CAD pair to rebound around 20 pips from the vicinity of mid-1.3100s. Meanwhile, the uptick lacked any strong follow-through as investors now seemed reluctant to place any aggressive bets ahead of the upcoming FOMC meeting.

This makes it prudent to wait for some strong follow-through buying before positioning for any further appreciating move amid absent relevant market-moving economic releases, either from the US or Canada.

Technical levels to watch

USD/CAD