USD/CAD erases majority of daily gains, turns quiet around 1.3250

• Saudi energy minister says oil supply is fully back online.
• WTI looks to settle below $60 following Monday's rally.
• Manufacturing sales in Canada declines more than expected in July.

The USD/CAD pair tested the 1.33 handle earlier in the day as the disappointing data from Canada and falling crude oil prices weighed on the CAD. However, the broad-based USD weakness in the second half of the day and the easing selling pressure on oil caused the pair to erase its daily gains. As of writing, the pair was posting modest daily gains at 1.3250.

Although the tensions in the Middle East remain high following the drone and missile attacks on Saudi Arabia's oil facilities, reports suggesting that the oil production in the Kingdom would return to normal levels faster than expected caused crude oil prices to make a deep correction after Monday's sharp upsurge.

Confirming the reports, Saudi energy minister today said that the supply was fully back online and didn't allow the barrel of West Texas Intermediate, which was last down 3.9% on the day at $59.40, recover its losses.

Earlier today, Statistics Canada reported that manufacturing sales in Canada contracted by 1.3% on a monthly basis in July following June's decline of 1.4% and hurt the demand for the Loonie. However, the selling pressure surrounding the Greenback caused the bullish momentum to lose strength. 

USD loses interest ahead of FOMC announcements

Although today's only data from the US revealed that industrial production rose more than expected in August, the US Dollar Index retraced Monday's rally and was last down 0.4% on the day at 98.25 as investors seem to be booking their profits ahead of tomorrow's critical Federal Open Market Committee (FOMC) announcements.

Previewing this event, “In our opinion, it would be difficult for the Fed to justify a 50-basis point move in such an environment, especially given that trade talks between the U.S. and China are set to resume in October," said National Bank of Canada analysts.

"We are therefore calling for a 25-bps cut on Wednesday to be followed by another similarly-sized move before the end of the year.”

Technical levels to watch for