USD/CAD advances to daily tops above 1.27

• The barrel of WTI extends losses below the $57 handle.
• DXY sticks to small gains above the 94.30 mark.
• Negative market sentiment weighs on the risk-sensitive loonie.

The USD/CAD pair, which struggled to find direction during the first half of the day, gained traction in the last hour and pierced above its consolidation channel to refresh its daily high at 1.2720. At the moment, the pair is trading at 1.2717, adding 0.28% on the day.

Although news of a 7.3 magnitude earthquake in Iraq didn't have a significant impact on crude oil prices at the start of the week, the barrel of WTI struggled to extend last week's rally and fell below the $57 handle, not allowing the commodity-linked loonie to gather strength against the buck. Moreover, a broad-based risk aversion on Monday is making it difficult for the CAD to find demand. Nonetheless, today's fall seems to be a consolidation of last week's rise and heightened expectations of an extension to the output cut deal is likely to trigger buying waves in upcoming days.

• Oman OilMin: Confident output cuts deal will be extended until end-2018
• OPEC Sec Gen Barkindo: Oil market rebalancing at accelerating pace

On the other hand, the US Dollar Index is preserving its small daily gains with no fundamental drivers putting pressure on the greenback. Following an early technical correction to 94.55, the index retreated to the 94.30 handle, where it found support. At the moment, the index is at 94.40, up 0.1% on the day.

Technical levels to consider 

The pair could face the initial hurdle at 1.2755 (20-DMA) ahead of 1.2800 (psychological level) and 1.2915 (Oct. 27 high). On the flip side, technical supports are located at 1.2620 (Oct. 24 low), 1.2530 (100-DMA) and 1.2460 (Oct. 18 low). Short-term technical indicators continue to suggest a neutral outlook for the pair.