USD/CAD stays in range below mid-1.30s as oil sell-off offsets USD weakness

  • US Dollar Index tests 95 with the initial reaction to the inflation report.
  • Wall Street's bleeding stops as tech shares rebound.
  • WTI extends losses, trades near $72 on Thursday.

Following yesterday's sharp upsurge, the USD/CAD pair is trading in a relatively tight 40-pip range on Thursday. As of writing, the pair was trading at 1.3040, losing 0.2% on the day.

Today's data from the U.S. showed that inflation, measured by the CPI, rose 0.1% on a monthly basis in September following August's 0.2% growth and fell short of the market expectation of 0.2%. Further details of the report revealed that the core CPI, which strips food and energy prices, increased 0.1% and 2.2% on a monthly and yearly basis, respectively, to match August's readings. Although the knee-jerk market reaction dragged the US Dollar Index down to the 95 area, it didn't take long for the index to start recovering its losses. At the moment, the index is down 0.24% on a daily basis at 95.24.

Commenting on today's data, "The Fed is not pursuing inflation, it is not seeking to damp an overheating economy. It is chasing a 'normal' rate environment and will continue to do so as long as economic growth holds up," FXStreet Senior Analyst Joseph Trevisani said.  

In the meantime, escalating concerns over the U.S. - China trade conflict, which weighed on crude oil prices and forced the commodity-sensitive loonie to weaken against its rivals yesterday, stay under the spotlight today. Although the bearish pressure on crude oil seems to have eased a little on Thursday, the barrel of WTI continues to trade in red near $72 with a daily loss of around 60 cents and makes it difficult for the CAD to gather further strength.

Technical levels to consider

The pair could face the first resistance at 1.3075 (100-DMA) ahead of 1.3200 (psychological level/Sep. 10 high) and 1.3290 (Jul. 19 high). On the downside, supports align at 1.3000 (psychological level), 1.2960 (200-DMA) and 1.2885 (Oct. 5 low).

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