USD/CAD moves sideways near 1.31, waits for next catalyst

• Crude oil consolidates Tuesday's rally, WTI trades near $54.
• US Dollar Index clings to modest daily gains above 97.50.
• Trading action is likely to remain subdued in the second half of the day.

The USD/CAD pair closed the day virtually unchanged near the 1.31 handle on Wednesday as rising crude oil prices allowed the commodity-related Loonie to stay resilient against the USD. In the absence of significant macroeconomic drivers, the pair is fluctuating in a narrow band near 1.31.

Oil rises on hopes of deeper output cuts

On Tuesday, reports claiming that the Organization of the Petroleum Exporting Countries (OPEC) and its allies were planning to discuss deeper oil output cuts amid the dismal energy demand growth outlook provided a boost to crude oil prices. The barrel of West Texas Intermediate (WTI) added 1.6% on the day and closed at $54.30 to support the CAD. Ahead of the weekly crude oil stock report of the US Energy Information Administration (EIA), the WTI is posting modest daily losses near $54.

On the other hand, the heavy selling pressure surrounding the GBP on Brexit uncertainty allowed the Greenback to find demand. The US Dollar Index snapped its five-day losing streak on Tuesday and extended its gains on Wednesday. As of writing, the index is up 0.12% on the day at 97.62.

Wholesale sales from Canada and the US monthly budget statement will be featured in the economic docket but are unlikely to receive a meaningful market reaction.

Technical levels to watch for