• Fails to capitalize on Friday’s dismal Canadian GDP-led upsurge to 2-week tops.
• Positive oil prices underpin Loonie and keep a lid on any strong follow-through.
• The USD gains some positive traction and helped limit any meaningful downside.
The USD/CAD pair extended its sideways consolidative price action through the early European session, with bulls still awaiting a sustained move beyond the 1.3300 handle.
The pair struggled for a firm direction at the start of a new trading week and failed to capitalize on Friday's strong upsurge of over 175-pips to two-week tops, triggered by an unexpected contraction of the Canadian economy in December.
Statistics Canada reported that the real Canadian GDP contracted by 0.1% m/m in December, with the quarterly growth rate falling to 0.4% during the last quarter of 2018. The reading missed consensus estimate of 1.2% by a big margin and exerted some heavy pressure on the Canadian Dollar.
Adding to this, a sharp pull-back in crude oil prices further weighed on the commodity-linked currency - Loonie, which coupled with a goodish pickup in the US Dollar demand, led by a strong upsurge in the US Treasury bond yields, prompted some aggressive short-covering rally.
Oil prices managed to regain some positive traction on Monday, though the positive factor was largely offset by the prevailing bullish sentiment surrounding the greenback and eventually failed to provide any meaningful impetus, leading to a subdued/range-bound price action.
Moving ahead, this week's key event/data risk - the latest BoC monetary policy update on Wednesday and the release of the closely watched monthly jobs report from the US (NFP) and Canada will now be looked upon for some meaningful directional impetus.
Technical levels to watch
On a sustained move beyond the mentioned handle, the pair is likely to accelerate the up-move further towards the 1.3340-50 supply zone before eventually aiming to reclaim the 1.3400 round figure mark. On the flip side, any meaningful retracement now seems to find immediate support near the 1.3255-50 region, which if broken might turn the pair vulnerable to head back towards testing sub-1.3200 level.
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