USD/CAD struggles to hold above mid-1.25s, remains directionless

After rising to a fresh daily high at 1.2555 in the last hour, the USD/CAD pair failed to extend its upside and was last seen trading at 1.2548, adding 20 pips, or 0.15%, on the day. 

Since the beginning of the day, the pair is trading in a narrow 30-pip band, having a difficult time finding its next short-term direction. Last week, the pair was able to close the fourth straight week higher as it gained nearly 70 pips. The greenback's rally and the broad-based selling pressure witnessed on crude oil fueled the pair's latest upsurge.

In the remainder of the day, the trading volume is likely to thin out as both American and Canadian markets will be on holiday. In the meantime, crude oil's price action remains subdued as well with the barrel of West Texas Intermediate trading little changed around mid-$49s. 

On Tuesday, the economic docket from Canada will be featuring housing starts and building permits data while the IBD/TIPP economic optimism will be released from the U.S. However, the pair could continue to remain in tight ranges before the FOMC releases the September meeting minutes on Wednesday.

Technical outlook

The RSI indicator on the daily graph is moving sideways a little above the 50 mark, supporting the view of a short-term neutral outlook. The pair could encounter the first technical resistance at 1.2500 (psychological level) followed by 1.2550 (Aug. 29 high) and 1.2635 (Aug. 30 high). On the flip side, supports align at 1.2425 (50-DMA/20-DMA), 1.2400 (psychological level) and 1.2330 (Sep. 21 low).

• USD/CAD showing tentative signs of topping out - Westpac