USD/CAD unresponsive to data, remains in consolidation channel

The USD/CAD pair is trading in a very narrow 30-pip channel on Monday amid a lack of fresh catalysts. At the moment, the pair is at 1.2660, 10 pips higher than last week's closing level.

Today's data from Canada and United States failed to provide an impetus for the pair. Although the Empire State Manufacturing Index, released by the Federal Reserve Bank of New York, dropped sharply to 9.8 in July after reaching its two-year high at 19.8 in the previous month, the US Dollar Index hadn't reacted significantly and continues to hold on to its daily gains just a tad below the 95 handle.

On the other hand, the Statistics Canada announced on Monday that international transactions in securities generated a net inflow of funds of $25.1 billion in the Canadian economy, a second consecutive large monthly net inflow of funds. However, the loonie is having a difficult time finding demand as crude oil prices struggle to gather a recovery momentum. Despite the slowdown in U.S. oil production, latest reports revealed that OPEC and non-OPEC nations pumped more oil in June, failing to reach their pledged output cut targets in June.

Technical outlook

Following the heavy sell-off on BoC's interest rate hike decision on Wednesday, the USD/CAD pair hadn't been able to make a recovery and the RSI indicator on the daily graph continues to show oversold readings well below the 30 mark. On the upside, 1.2700 (psychological level) could be seen as the initial hurdle ahead of 1.2770 (Jul. 13 high) and 1.2925 (20-DMA). To the downside, short-term supports could be seen at 1.2640 (daily low), 1.2590 (Apr. 20, 2016, low) and 1.2500 (psychological level). 

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