USD/CAD makes a sharp U-turn, trades below 1.3350

• USD/CAD fell sharply after breaking below 1.3400 on Thursday.
• US Dollar Index lost its traction in the American session.
• WTI clings to decisive daily gains above $40.

The USD/CAD pair climbed to its highest level since early August at 1.3418 on Thursday but reversed its direction during the American trading hours. As of writing, the pair was down 0.33% on a daily basis at 1.3342.

The greenback, which has been gathering strength against its rivals since the start of the week, came under modest pressure in the second half of the day on Thursday. Although there was no clear catalyst behind the renewed USD weakness, a decisive rebound witnessed in major equity indexes in the US seems to be weighing on the US Dollar Index (DXY).

At the moment, the DXY is posting small daily losses at 94.30 and the S&P 500 Index is up 0.35%. 

WTI recovery helps CAD find demand

On the other hand, rising crude oil prices are providing a boost to the commodity-related loonie and allowing the bearish pressure on USD/CAD to remain intact. After spending the majority of the day in a tight range near mid-$39s, the barrel of West Texas Intermediate (WTI) turned north in late American session and touched a daily high of $40.35. 

Earlier in the day, the data published by Statistics Canada showed that payroll employment in July rose by 5.1%, or 739,700, but was largely ignored by the market participants. There won’t be any macroeconomic data releases featured in the Canadian economic docket on Friday and Durable Goods Orders data from the US will be looked upon for fresh impetus.

Technical levels to watch for