• USD/CAD struggled to capitalize on Friday’s weaker Canadian GDP-led gains.
  • Hawkish Fed expectations underpinned the USD and extended some support.
  • Investors eye US ISM PMI for some impetus ahead of the key FOCM meeting.

The USD/CAD pair lacked any firm directional bias on Monday and remained confined in a narrow trading band, below the 1.2400 mark through the early European session.

The pair, so far, has struggled to gain any meaningful traction and continued with its sideways consolidative price action on the first day of a new week. As investors looked past Friday's disappointing Canadian GDP print for August, a more hawkish Bank of Canada acted as a tailwind for the domestic currency and capped the upside for the USD/CAD pair.

It is worth recalling that the BoC surprised investors last Wednesday by abruptly ending its bond-buying programme and pulling forward its expected timeline for interest rate hikes. The Canadian central bank forecast that inflation is on pace to hit the 2% target in the second or third quarter of 2022, setting the stage for an early interest rate hike move.

That said, a combination of factors continued lending some support to the USD/CAD pair. A softer tone around oil prices held traders from placing aggressive bullish bets around the commodity-linked loonie. Apart from this, a modest US dollar strength further collaborated to limit the downside for the major, at least for the time being.

The USD stood tall near two-and-half-week tops and drew support from growing acceptance that the Fed would be forced to adopt a more aggressive policy response to contain stubbornly high inflation. The speculations were further fueled by Friday's release of the Core PCE Price Index – the Fed's preferred inflation gauge – that held steady near 30-year highs in September.

Hence, the market focus will remain on the outcome of a two-day FOMC policy meeting, scheduled to be announced on Wednesday. In the meantime, traders might take cues from Monday's release of the US ISM Manufacturing PMI. This, along with oil price dynamics, might provide some impetus and allow traders to grab some short-term opportunities around the USD/CAD pair.

Technical levels to watch


Today last price 1.2389
Today Daily Change -0.0001
Today Daily Change % -0.01
Today daily open 1.239
Daily SMA20 1.2428
Daily SMA50 1.2568
Daily SMA100 1.2528
Daily SMA200 1.249
Previous Daily High 1.2408
Previous Daily Low 1.2328
Previous Weekly High 1.2432
Previous Weekly Low 1.23
Previous Monthly High 1.2739
Previous Monthly Low 1.2288
Daily Fibonacci 38.2% 1.2378
Daily Fibonacci 61.8% 1.2359
Daily Pivot Point S1 1.2342
Daily Pivot Point S2 1.2295
Daily Pivot Point S3 1.2262
Daily Pivot Point R1 1.2423
Daily Pivot Point R2 1.2456
Daily Pivot Point R3 1.2503



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