USDCAD finds support around 1.3250 as fading risk-on sentiment and lower oil provide tailwinds

After testing the cushion around 1.3250 during the Tokyo session, the USDCAD is exhibiting a rangebound pattern. The risk-taking instinct has begun to wane, driven by increased volatility ahead of the outcome of the US midterm elections and the longer weekend due to last Friday's Veterans Day vacation. The risk-sensitive currencies are losing their upward momentum.

S&P500 futures have been negatively impacted by election-related anxiety. The changing of the guard in the House of Representatives will have an effect on expansionary policies, as extra permission from Republicans will delay program implementation. The incident could reduce future economic projections at a time when the US economy is already susceptible to recession as a result of rising interest rates, which has caused investors to become apprehensive.

The US dollar index (DXY) has extended its retreat to approximately 107.00 despite the fact that the Federal Reserve (Fed) will not implement substantial rate hikes because inflation has dropped. In addition, long-term US Treasury yields have returned to around 3.90 percent.

Meanwhile, investors in the Canadian dollar await Wednesday's inflation data for additional advice. The headline Consumer Price Index (CPI) is anticipated to increase to 7.0% from 6.9% in the previous release. In contrast, the core CPI, which excludes oil and food prices, is anticipated to rise to 6.3%, up from the previous reading of 6.0%.

Despite the loosening of Covid-19 limits in China, oil prices have declined after encountering barriers of roughly $89.00. It appears that oil bulls require a compelling rationale to extend the recent advance.