USD/CAD retraces majority of daily rally, trades above 1.33
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- WTI posts small daily gains below $55 on Monday.
- US Dollar Index retreats to 99 area in NA session.
- Bank of Canada is expected to keep policy rate steady on Wednesday.
The USD/CAD pair rose to its highest level in ten-weeks at 1.3362 earlier today but failed to preserve its bullish momentum with the trading volume thinning out in the second half of the day amid the Labor Day holiday in Canada and the United States. As of writing, the pair was trading at 1.3323, adding 0.1% on a daily basis.
Focus likely to remain on US-China trade conflict
The barrel of West Texas Intermediate started the week near the $55 mark on Monday and lost its traction to make it difficult for the commodity-related Loonie to continue to gather strength. Although the subdued market action prevents crude oil from fluctuating sharply, the fact that the US started imposing 15% tariffs on a variety of Chinese imports on September 1 and the Chinese Commerce Ministry lodged a complaint against US tariffs at the World Trade Organization (WTO) today suggests that we could see a further escalation in the US-China trade conflict and a sharp market reaction when investors return tomorrow.
Meanwhile, the heavy selling pressure surrounding major European currencies today allowed the Greenback to gather strength with the US Dollar Index climbing to its highest level in more than two years at 99.13. Nevertheless, the index is now posting small daily gains at 99 and is likely to stay near that level while waiting for the Markit and the ISM Manufacturing PMI reports on Tuesday.
Later in the week, the Bank of Canada will announce its monetary policy decisions. Previewing this event, "the BoC has the luxury to wait and analyse developments on the international front before it decides whether or not it needs to pull the trigger on looser monetary policy," said National Bank Financial (NBF) analysts.
Technical levels to watch for
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