USD/CAD extends rebound, trades above 1.3800 on oil selloff

• USD/CAD rebounds after finding support at 1.3725 on Wednesday.
• Falling crude oil prices weigh on commodity-related loonie.
• US Dollar Index pushes higher above 99 on souring sentiment.

The USD/CAD pair fell to its lowest level in more than two months at 1.3725 on Wednesday and staged a decisive recovery in the second half of the day. As of writing, the pair was trading at 1.3815, adding 0.25% on a daily basis.

WTI falls sharply

The selling pressure surrounding crude oil prices on Wednesday seems to be weighing on the commodity-sensitive loonie. Despite easing energy demand concerns, heightened US-China tensions cause crude oil to push lower.

As of writing, the barrel of West Texas Intermediate (WTI) was trading at $32.37, losing 5.2% on a daily basis. Later in the day, the weekly API crude oil inventory report will be looked upon for fresh impetus.

Meanwhile, Bank of Canada Governor Stephen Poloz said if the fiscal policy is not utilized, extreme conditions that warrant negative interest rates could be experienced.

On the other hand, the souring market sentiment, as reflected by falling US Treasury bond yields and uninspiring performance of US stocks, help USD find demand as a safe-haven. The US Dollar Index, which slumped t0 its lowest level in more than three weeks at 98.72 earlier in the day, reversed its direction and was last seen gaining 0.18% on the day at 99.20.

There won’t be any macroeconomic data releases in the remainder of the session and investors will be keeping a close eye on the Federal Reserve’s Beige Book.

Technical levels to watch for