USD/CAD erases majority of daily gains, trades below 1.3100

• USD/CAD lost its traction in American session and dropped below 1.3100.
• Modest USD weakness seems to have caused USD/CAD to turn south.
• WTI continues to trade in the red below $40.

The USD/CAD pair closed the fifth straight week in the negative territory and staged a modest rebound on Monday. After spending the majority of the day above 1.3100, however, the pair lost its traction and erased a large portion of its daily gains. As of writing, USD/CAD was still up 0.15% on the day at 1.3080.

Oil selloff weighs on CAD

In the absence of significant fundamental drivers and macroeconomic data releases on Monday, the poor performance of crude oil made it difficult for the commodity-related loonie to stay resilient against its rivals. The barrel of West Texas Intermediate touched its lowest level in nearly two months at $38.55 earlier in the day and was last seen trading at $39.15, losing 0.75% on a daily basis.

On the other hand, the US Dollar Index (DXY), which capitalized on strong US data releases and rose 0.75% last week, edged higher above 93.00 during the European session. Amid thin trading conditions, a sharp drop witnessed in the GBP/USD pair helped the USD find demand. 

With the US and Canadian markets staying closed due to the Labor Day holiday on Monday, the pair is likely to continue to fluctuate in its daily range in the remainder of the day.

On Tuesday, the IBD/TIPP Economic Optimism and Consumer Credit Change data will be featured in the US economic docket on Tuesday.

Technical levels to watch for