USD/CAD drops below 1.32 on crude oil rally

• Crude oil gains traction in the US afternoon.
• US Dollar Index moves sideways near 94.80.

The USD/CAD pair came under a heavy selling pressure in the last hours as the rising crude oil prices ramped up the demand for the commodity-sensitive loonie. The pair, which touched its highest level since June 29 at 1.3260, was last seen trading at 1.3175, losing 15 pips on the day.

Earlier today, after the weekly report released by the EIA showed a surprise 5.8 million barrels build in crude oil stocks in the United States, the barrel of West Texas Intermediate plummeted to its lowest level in nearly a month at $66.32. However, news of Venezuela’s Amuay oil refinery shutting down one of its distillation units caused concerns over supply disruptions and allowed crude oil prices to gains traction. At the moment, the barrel of WTI was up 0.85% on the day at $67.75.

On the other hand, the US Dollar Index, once again, lost its momentum above the 95 mark and turned flat in the 94.70/80 area following the disappointing housing data from the United States. Investors are now focused on the Fed’s Beige Book.  

“The minutes from the June FOMC meeting noted that “contacts in some Districts indicated that plans for capital spending had been scaled back or postponed as a result of uncertainty over trade policy.” Any additional evidence on disruptions caused by trade uncertainty will be of interest as the June minutes indicated that “most participants noted that uncertainty and risks associated with trade policy had intensified,” Nomura analysts wrote.

Technical levels to consider

On the downside, supports could be seen at 1.3170 (20-DMA/daily low) aligns as the initial support ahead of 1.3100/1.3095 (psychological level/50-DMA) and 1.3065 (Jul. 9 low). On the upside, resistances could be seen at 1.3200 (psychological level),  1.3260 (daily high) and 1.3300 (psychological level).