USD/CAD approaches 2018 highs above 1.3350 as oil extends decline post-EIA

• Crude oil prices came under pressure after EIA report.
• Commodity-sensitive loonie continues to weaken against the buck.
• US Dollar Index rises above 97.50 ahead of Powell speech.

The USD/CAD pair extended its rally in the last hour and touched its highest level in five months at 1.3358 as the commodity-related loonie met selling pressure amid the crude oil sell-off. As of writing, the pair was trading at 1.3355, gaining 0.47% on a daily basis.

After the weekly EIA report showed that the crude oil production in the U.S. stayed unchanged at 11.7 million barrels per day last week and inventories increased by 3.6 million barrels, the barrel of West Texas Intermediate slumped to a fresh daily low at $50.60. At the moment, the WTI is down 2.6% on the day at $50.75.

On the other hand, boosted by the upbeat GDP report and rising T-bond yields, the greenback gathered strength to support the pair rise. Ahead of FOMC Chairman Powell’s speech in New York, the US Dollar Index is up 0.15% on the day at 97.50. Commenting on the GDP figures, “US economic growth in the third quarter confirmed at 3.5% was never the problem.  It’s the slope down to 2.5% in the fourth quarter and beyond that should worry the Fed. Whether rate increases are the cause is debatable but the governors do not want to be blamed for a return to the post-recession doldrums,” said Joseph Trevisani, a senior market analyst at FXStreet.

• US:  Real GDP growth  in Q3 (second estimate) stays unchanged at 3.5% as expected.
• US:  International trade deficit  rose to $77.2 billion in October from $76.3 billion in September.

Technical levels to consider

The next target on the upside for the pair aligns at 1.3385 (Jun. 27 high/2018 high) before 1.3465 (Jun. 12, 2017, high) and 1.3500 (psychological level). On the other hand, supports are located at 1.3290 (daily low), 1.3235 (Nov. 27 low) and 1.3185 (Nov. 26 low).