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USD/CAD drops to 1.36 as oil rebounds sharply

  • WTI gains traction and rises toward $47.
  • US Dollar Index inches close to 97.
  • Manufacturing sector loses momentum in Canada.

After posting a daily high of 1.3663 in the early NA session, the USD/CAD pair came under a renewed pressure as the commodity-sensitive loonie gathered strength on rising oil prices. As of writing, the pair was trading at 1.3597, losing 0.3% on a daily basis.

Despite a lack of fundamental drivers, crude oil prices gained traction in the second half of the day and retraced daily losses with the barrel of West Texas Intermediate rising to its highest level since December 20 above the $47 handle. At the moment, the WTI is adding 3.9% on the day at $47.18.

However, the broad-based USD strength on Wednesday seems to be limiting the pair's losses for now. With European currencies facing heavy selling pressure, the demand for the greenback rose today and boosted the US Dollar Index, which was last seen at its highest level since December 27 at 96.75, gaining 0.7% on the day. Today's data from the United States showed that the manufacturing sector stayed relatively healthy. On the other hand, Canadian Manufacturing PMI slumped to its lowest level in 2-years at 53.6 in December from 54.9 in November.

Later this week, investors will be paying close attention to the U.S. and Canada labour market reports.

Technical levels to consider

The pair could encounter the first resistance at 1.3665 (Dec. 31, 2018, high) ahead of 1.3720 (May 15, 2017, high) and 1.3770 (May 11, 2017, high). On the downside, supports align at 1.3570 (daily low), 1.3500 (psychological level), and 1.3450 (Dec. 20, 2018, low).

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