USD/CAD stretches gains above 1.27 as WTI edges lower toward $56
- WTI extends losses to fresh weekly lows on Tuesday.
- Loonie weakens against its rivals on crude oik sell-off.
- Greenback remains under pressure despite upbeat PPI data.
The USD/CAD pair gathered bullish momentum in the early NA session and rose its highest level since November 8 at 1.2767. At the moment, the pair is trading a few pips below that recent high and is gaining 0.3% on the day.
Rising US production weighs on crude oil prices
Following Monday's choppy trading action, crude oil came under pressure on Tuesday as the EIA's monthly report pointed to rising shale production in the United States in October. After starting the day slightly below the $57 handle, the barrel of West Texas Intermediate lost more than 50 cents today and was last seen trading at its lowest level since November 6 at $56.15. The commodity-sensitive loonie is likely to weaken further against its peers in case crude oil fails to stage a recovery in the near-term.
On the other hand, despite higher-than-expected PPI data from the U.S., the greenback is having a difficult time recovering its early losses on Tuesday. Dovish comments from the St. Louis Fed President James Bullard seems to have underpinned the demand for the buck. Bullard argued that the low unemployment wouldn't necessarily boost the inflation and added that it would be appropriate for the Fed to keep the interest rate at its current level.
- Fed's Bullard: Current interest rate level likely to remain appropriate over near-term
- US: PPI for final demand rises 0.4% in October
With no macroeconomic data releases from Canada, investors will look upon the consumer inflation data from the U.S. for fresh impetus.
Technical levels to consider
With a daily close above 1.2765 (20-DMA), the pair could aim for 1.2800 (psychological level) and 1.2915 (Oct. 27 high). On the downside, supports align at 1.2700 (psychological level), 1.2620 (Oct. 24 low) and 1.2530 (100-DMA).