USD/CAD rebounds to 1.2870 area on modest USD strength

• USD/CAD erased its daily losses in early American session.
• WTI reversed its direction, turned negative on the day near $48.
• US Dollar Index posts small daily gains near 90.30.

After spending the majority of the day in the negative territory, the USD/CAD pair gained traction in the early American session and advanced to a daily high of 1.2876. As of writing, the pair was virtually unchanged on the day at 1.2867.

WTI retreats to $48

Earlier in the day, the risk-on market atmosphere helped crude oil prices push higher and caused the greenback to lose interest as a safe-haven. The barrel of West Texas Intermediate (WTI) rose to $48.95 and the US Dollar Index slumped below 90.

However, capital flows toward the end of the European session caused the market volatility to heighten modestly amid thin trading conditions. The DXY recovered to 90.30 area and the WTI turned negative on the day near $48, allowing USD/CAD to turn north in the last hour.

The only data from the US showed on Monday that the Dallas Fed Manufacturing Business Index declined to 9.7 in December from 12 in November but was largely ignored by the market participants.

In the meantime, the S&P 500 Index renewed its all-time high after the opening bell on Monday, suggesting that risk flows could make it difficult for the greenback to preserve its strength.

Technical levels to watch for