USD/CAD drops below 1.3170 on impressive oil rally

• Commodity-sensitive loonie outperforms rivals on oil rebound.
• WTI gains more than 5% on Monday.
• US Dollar Index steadies above 97 ahead of PMI data.

The USD/CAD pair started the week with a bearish gap and extended its losses to a fresh two-week low as the loonie gathered strength on rising oil prices. As of writing, the pair was down nearly 1% on the day at 1.3165.

Following  the announcement of the U.S. and China agreeing to a ceasefire on trade, crude oil prices surged on Monday with the barrel of West Texas Intermediate rising more than 5% on the day. Additionally, reports of Qatar pulling out of OPEC to focus on gas production provided an additional boost to crude oil. At the moment, the WTI is up 5.1% on the day at $53.10.

On the other hand, the greenback recovered the losses it suffered during the first half of the day and is now moving sideways above the 97 mark, not allowing the pair to retrace its fall. Later in the session, the IHS Markit will publish the Manufacturing PMI data for Canada and the U.S. Furthermore, the ISM will release its Manufacturing PMI for the U.S. as well.  

Technical levels to consider

The pair could face the first technical support at 1.3135 (50-DMA) ahead of 1.3075 (100-DMA) and 1.3035 (200-DMA). On the upside, resistances are located at 1.3200 (psychological level), 1.3265 (daily high) and 1.3330 (Nov. 30 high). In the meantime, with today’s fall, the RSI indicator on the daily chart dipped below the 50 level, suggesting that the bearish momentum is building up.