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• The Dollar remains capped below 1.3850 with the upside bias intact.
• A moderate rebound in Oil prices has given some support to the CAD earlier today.
• USD/CAD remains bullish, with the support area above 1.3800 holding bears for now.

The US Dollar’s rally remains capped below 1.3850. The pair failed to break that level on its latest attempt on Monday and is trimming gains during the European session, yet with downside attempts looking weak so far.

The Canadian Dollar has drawn some support from a previous rebound in Crude prices, triggered by escalating tensions in the Middle East. Israel has launched strikes in Lebanon as a response to a deadly attack from the Hizbullah on the weekend. This might inflame an already unsteady region and threaten the Oil supply.

On the other hand, the Fed is meeting this week, with the market expecting a dovish turn on the bank’s rhetoric, which might increase negative pressure on the USD.

Data released last week revealed that PCE inflation remained steady in June. The headline figure showed a 2.5% yearly increase, with the core PCE at 2.6%. These levels are close to the bank’s 2% target and confirm that inflation is gradually cooling, which keeps hopes of Fed easing alive.

The technical picture remains bullish, with downside attempts capped at the 1.3800-1.3820 area. Below there, 1.3750 would be the next target. Immediate resistance is at 1.3850 followed by the November 2023 high, at 1.3900.

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