USD/CAD jumps to weekly highs above 1.3450 on oil selloff

• USD/CAD gained traction and rose to fresh weekly high on Thursday.
• Concerns over energy demand outlook weigh heavily on crude oil prices.
• US Dollar Index erases daily gains in American session.

The USD/CAD pair rose sharply in the last hour and touched its highest level in a week at 1.3458 as plunging crude oil prices weighed on the commodity-sensitive loonie. As of writing, the pair was up 0.82% on the day at 1.3450.

WTI slumps below $40

The data from the US on Thursday showed that the economic activity, as measured by the real Gross Domestic Product (GDP), contracted by 32.9% on a yearly basis in the second quarter. This reading seems to have revived concerns over a lacklustre recovery in the energy demand and triggered a heavy selloff in crude oil. At the moment, the barrel of West Texas Intermediate, which touched its lowest level since early July at $38.70, is down nearly 5% on the day at $39.25.

On the other hand, the greenback lost its strength against its rivals after the GDP report caused the US Treasury bond yields to push lower.

With the US Dollar Index pulling away from daily highs and turning flat on the day near 93.30 amid a 5.7% drop in the 10-year US T-bond yield, USD/CAD’s upside remains capped for the time being. Nevertheless, unless the WTI stages a rebound, the pair could try to push higher toward 1.3500. 

On Friday, Statistics Canada will release its monthly GDP data. Analysts expect to see a 3.5% expansion in the Canadian economy in May following April’s decline of 11.6%. 

Technical levels to watch for