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USD/CAD drops below 1.4000 as WTI extends recovery

  • USD/CAD turns south after rising to 1.4065 on Monday.
  • Crude oil recovery helps commodity-sensitive CAD find demand.
  • US Dollar Index retreats to 100 area ahead of CPI data. 

The USD/CAD pair gained 70 pips on Monday and continued to push higher on Tuesday to touch a daily high of 1.4065. However, the recovery witnessed in crude oil prices helped the CAD outperform its American counterpart and weighed on the pair. As of writing, USD/CAD was down 0.15% on a daily basis at 1.3985.

Despite OPEC+ producers’ announcements of additional oil output cuts, the barrel of West Texas Intermediate (WTI) closed Monday deep in the negative territory. With risk-on flows starting to dominate the markets on Tuesday, the WTI turned north and was last seen gaining 3.6% on the day at $26.25.

USD weakens ahead of CPI data

On the other hand, the upbeat market mood as reflected by rising European equity indexes is making it difficult for the safe-haven greenback to gather strength. The US Dollar Index, which rose more than 1% on Monday, is posting modest daily losses around the 100 mark, keeping the bearish pressure on USD/CAD intact.

Later in the session, the inflation report from the US will be looked upon for fresh impetus. Markets expect the annual core Consumer Price Index to fall to 1.7% in April from 2.1% in March. There won’t be any significant macroeconomic data releases from Canada and the USD’s valuation is likely to impact the pair’s movements in the second half of the day.

Technical levels to watch for

 

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