USD/CAD retreats from highs on oil rally, trades below 1.36

WTI rises more than 8% on Wednesday.
US Dollar Index stays in the positive territory near 97.

Eren Sengezer FXStreet

After climbing to its highest level since May of 2017 at 1.3617, the USD/CAD erased its gains and was last seen trading at 1.3580, where it was down 0.08%, or 10 pips, on the day.

Although the broad-based USD strength amid rising Treasury bond yields allowed the pair to extend its gains earlier in the session, a strong recovery witnessed in crude oil prices helped the commodity-sensitive loonie recover its losses. While the 10-year T-bond yield and the 5-year T-bond yield are adding 1.35% and 1.9%, respectively, the DXY is up 0.45% on the day at 97.02.

Following a sharp sell-off that caused the barrel of West Texas Intermediate to touch its lowest level in 18 months near $42 on Monday, the improved sentiment today paved the way for a decisive rebound. At the moment, the WTI is up 9.2% on the day at $46.30.

There won't be any macroeconomic data releases from Canada in the remainder of the week and investors are likely to continue to closely follow crude oil prices.

Technical levels to consider

The initial resistance aligns at 1.3615 (daily high) ahead of 1.3670 (May 18, 2017, high) and 1.3720 (May 15, 2017, high). On the downside, supports are located at 1.3560 (Dec. 24 low), 1.3500/1.3495 (psychological level/Dec. 21 low) and 1.3445 (Dec. 20 low).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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