- WTI advances to new highs above $60.
- DXY sticks to daily recovery gains.
- ISM PMI and FOMC minutes awaited.
After recovering to 1.2530 earlier today, the USD/CAD pair came under a renewed selling pressure as the commodity-sensitive loonie gathered strength against its peers on rising crude oil prices. As of writing, the pair was trading at 1.2505, losing around 10 pips on the day.
Although the crude oil output from Libya and the Forties pipeline returned to normal levels following supply disruptions in late December, the barrel of West Texas Intermediate extended its rally to the highest level since June 2015 at $60.90. As of writing, the barrel of WTI was trading at $60.80, adding 0.7% on the day. Later in the session, the API is going to release its weekly crude oil supply report, and a larger-than-expected draw in inventories in the U.S. could provide an additional boost in the post-settlement trade.
On the other hand, following yesterday's sharp drop to a fresh multi-month low, the US Dollar Index gained traction on Wednesday and rose toward the 92 mark ahead of the release of the ISM Manufacturing PMI data and the FOMC December meeting minutes.
“Investors will be looking for any clues to assess the outlook for monetary policy. Our Fed watcher Philip Marey continues to argue that core inflation will continue to undershoot the Fed’s 2% target. Therefore, he expects only two hikes this year – one in June and another in December - instead of the three hikes that are implied by the dot plot,” Rabobank analysts argued in a recent report.
Technical outlook
With a decisive break below 1.2500 (psychological level/daily low), the pair could aim for 1.2450 (Oct. 19 low) and 1.2410 (Sep. 29 low). On the flip side, resistances align at 1.2610 (100-DMA), 1.2700 (psychological level) and 1.2750 (50-DMA/20-DMA).
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