USD/CAD recovers toward 1.27 as oil remains under pressure

• WTI fails to hold above the $58 handle.
• US Dollar preserves daily gains above 93.
• Bank of Canada meeting in focus this week.

The USD/CAD pair, which recorded one of its biggest daily drops of the year on Friday, renewed its 5-week low at 1.2655 before American traders hit their desks but struggled to push lower as oil prices failed to extend their OPEC-inspired rally. As of writing, the pair was trading at 1.2705, up 0.15% on the day.

After testing the $59 handle on Thursday when OPEC announced that they have decided to extend the OPEC/non-OPEC output cut deal until the end of 2018, the barrel of West Texas Intermediate started to retrace its earnings as rising prices are thought to ramp up the shale production in the United States. In fact, the total number of active oil rigs reached its highest level since September last week according to the weekly report released by the Baker Hughes. As of writing, the barrel of WTI was trading at $57.60, down 1.3% on the day.

On the other hand, boosted by the news of the Senate approving the tax bill over the weekend, the greenback shook off the negative impact of Friday's political developments and staged a modest recovery on Monday, supporting the pair's upside. At the moment, the DXY is up 0.42% at 93.20.

Ahead of Wednesday's BOC meeting, oil prices and the DXY movements are likely to continue to drive the pair's price action. 

Technical levels to watch

The pair faces the initial support at 1.2655 (daily low) ahead of 1.2550 (100-DMA) and 1.2500 (psychological level). On the upside, resistances could be encountered at 1.2750 (20-DMA), 1.2835 (Nov. 21 high) and 1.2910 (Nov. 30 high).