USD/CAD rebounds from 12-day-old support on WTI pullback

USD/CAD edges higher around 1.2580, up 0.20% intraday, during Thursday’s Asian session. The loonie pair dropped the most in over six weeks the previous day, marking the two-day fall, before reversing from the weekly low so far during the day.

Although the US Dollar Index (DXY) remains sidelined after stepping back from a three-month high, the pullback in oil prices seems to have favored the USD/CAD buyers of late. It should be noted that the weakness in Antipodeans, amid the coronavirus woes, could also be linked to the pair’s latest performance.

Upbeat equities renewed economic hopes and allowed the greenback buyers to take a breather on Wednesday. The same offered additional strength to the WTI prices, Canada’s key export, which marked the strongest daily gains since April.

However, an increase in the official oil inventories, published by the US Energy Information Administration (EIA), +2.11M versus -4.46M forecast and -7.89M prior, dragged the oil prices. Also, escalating Delta covid variants, with multi-day high infections in Australia and Tokyo, not to forget gradually increasing daily cases in the UK and China, offer extra burden on the USD/CAD prices.

Amid these plays, US Treasury yields remain directionless as Japanese markets are off but the stock futures print mild gains by the press time.

Looking forward, US Chicago Fed Manufacturing Index, Weekly Jobless Claims and Existing Home Sales will join Canadian Employment Insurance Beneficiaries Change to entertain intraday traders. However, major attention will be given to the European Central Bank (ECB) monetary policy meeting even if the policymakers aren’t expected to act.

Technical analysis

With the bullish MACD and upbeat RSI backing the bounce off short-term support line, around 1.2550, USD/CAD is on the way to challenge April’s top near 1.2655. Though, any further upside will struggle around 1.2675 and March’s high near 1.2740 before challenging the monthly peak of 1.2807.