USD/CAD trims losses but remains near monthly lows under 1.3200

• Canadian dollar continues to outperform, supported by the BoC and higher crude oil prices. 
• USD/CAD heads for lowest close in a month. 

The USD/CAD pair is falling on Thursday for the third day in a row, accumulating a decline of more than a hundred pips. During Thursday’s American session trimmed losses but remains under pressure, below 1.3200. 

The Bank of Canada on Wednesday kept interest rates unchanged as expected offering an unexpected upbeat tone. The statement from the central bank triggered a rally of the Canadian dollar across the board.  “The near-term boost to CAD on the BoC’s continued “wait and see” approach is unlikely to translate into longer-term gains as it becomes increasingly likely that they will follow other central banks in easing in 2020,” explained analysts at MUFG Bank. 

A key driver for risk sentiment and for CAD particularly will be whether the December 15 US tariff hikes on Chinese imports ultimately go into effect or are postponed, in the event that a deal is not reached, added MUFG analysts. Trade headlines continue to be mixed as the deadline approaches. 

Another factor behind USD/CAD weakness is the rally in crude oil prices. The OPEP+ meeting is taking place in Vienna and WTI trades near the highest level in months. Since the beginning of the week, it gained three dollars. 

From a technical perspective, USD/CAD continues to look bearish after breaking key technical levels and as it holds below 1.3180. On the downside, the next support is seen around daily lows at 1.3155 followed by 1.3130 (September low).