USDCAD refreshes day high above 1.3520 as risk-off mood rebounds, oil extends losses

• USDCAD has refreshed its day’s high at 1.3523 as the positive risk profile is losing its traction.
• Investors are cautious as the odds support a majority win of Republicans, which may trigger political instability.
• Oil prices have slipped as oil demand optimism is returning on expectations of a slowdown in Fed’s rate hike pcae.

The USDCAD pair has comfortably established above the psychological resistance of 1.3500 in the early European session. The Greenback bulls have been supported by a decline in the risk appetite of the market participants and a steep fall in oil prices.

The risk-off is attempting to regain its traction as investors are getting anxious ahead of the US mid-term elections’ outcome. Investors are cautious as the odds support a majority win of Republicans, which may trigger political instability. The content of 435 seats of the House of Representatives and 35 seats of the Senate is expected to bring volatility in the economy.

A note from ANZ Bank states that “We regard a Republican-controlled Congress as the most likely scenario (55%). Not far behind, at 41%, is a split Congress, with a Republican-led House and a Democrat Senate.”

This week, the critical trigger for the market will be the release of the US inflation data. Projections claim that the headline inflation rate will trim to 8.0% and the core Consumer Price Index (CPI) that excludes oil and food prices from the calculation is seen marginally lower at 6.5%.

On the Loonie, the speech from Bank of Canada (BOC) Governor Tiff Macklem will remain in focus. The BOC Governor is expected to dictate the likely monetary policy action ahead. Last week’s robust payroll data is expected to support the central bank in making a hawkish decision on interest rates. Canada’s Net Change in Employment was recorded at 108.3k vs. the prior release of 21.1k.

Meanwhile, oil prices have slipped sharply as investors believe that expectations of a slowdown in the Fed’s rate hike pace are fetching optimism for oil demand ahead.