USD/CAD eases off highs post-BoC survey, remains above 1.24
- DXY consolidates gains above 92.
- BoC Business Outlook Survey ramps up expectations of a rate hike.
- WTI stays quiet below $62 on Monday.
After rising to a fresh session high at 1.2450, the USD/CAD pair erased the majority of its daily gains and was last seen trading at 1.2420, where it was up only 10 pips, or 0.08%, on the day.
The broad-based greenback strength on Monday allowed the pair to start recovering last week's 150-pip loss. The US Dollar Index rose above the 92 mark but failed to preserve its bullish momentum as this rise hadn't been supported by a macroeconomic data. The DXY went into a consolidation phase above the 92 mark during the NA session and was up 0.33% at 92.05 as of writing.
On the other hand, the loonie showed some resilience against the buck after the BoC published the findings of its Q4 Business Outlook Survey. Although the statement noted that inflation expectations were unchanged from the third quarter, it also highlighted rising labor costs, often related to upcoming increases in minimum wage as well as non-labor input costs, would put upward pressure on output prices.
Commenting on the BoC's report, "today's report should thus provide Bank of Canada Governor Stephen Poloz with further confidence that emergency level interest rates are no longer needed, with the next policy interest rate increase to come next week (January 17th)," TD Securities analysts wrote today.
Meanwhile, the barrel of West Texas Intermediate is making a technical correction on Monday and is moving sideways near mid$61s, not providing a catalyst for the pair.
Technical outlook
With today's modest recovery, the RSI indicator on the daily graph rose above the 30 mark, showing that the pair is correcting its oversold readings. On the upside, the initial hurdle for the pair aligns at 1.2500 (psychological level) ahead of 1.2555 (Jan. 4 high) and 1.2625 (20-DMA). On the downside, supports are located at 1.2355 (Jan. 5 low), 1.2300 (psychological level) and 1.2230 (Sep. 20 low).