USD/CAD extends sideways grind above 1.3200 as oil rally loses steam

• WTI consolidates last Friday's gains, trades above $57.
• US Dollar Index posts modest losses on Monday.
• American session is likely to be quiet in absence of significant data releases.

The USD/CAD pair closed the previous week virtually unchanged above the 1.3200 handle and is having a difficult time setting its next short-term direction as the lack of fundamental drivers force investors to remain on the sidelines. As of writing, the pair was flat on the day at 1.3220.

After moving sideways near the 1.3250 mark on Friday, a sharp increase witnessed in crude oil prices allowed the commodity-related CAD to gather strength against the USD. The barrel of West Texas Intermediate (WTI) gained more than 1.5% on Friday before going into a consolidation phase on Monday. As of writing, the barrel of WTI was down 0.45% on the day at $57.50.

USD awaits FOMC meeting minutes

On the other hand, the US Dollar Index is registering small losses below the 98 thresholds on Monday, allowing the pair to stay directionless despite the uninspiring performance of crude oil. There won't be any macroeconomic data releases in the remainder of the day and the pair is likely to stay quiet.

On Wednesday, inflation report from Canada and the Federal Open Market Committee's (FOMC) October meeting minutes could cause the pair's volatility to increase.

Previewing the FOMC event, "We anticipate discussions to touch upon what "material reassessment" of the outlook would lead the FOMC to shift its policy stance," said TD Securities analysts. "The minutes may also provide further insights into the Framework Review debate."

Technical levels to watch for