USD/CAD pares early losses on DXY rebound, trades above 1.3170

• USD/CAD reversed its direction after slumping to multi-month lows at 1.3134.
• Broad-based USD recovery helped the pair erase its early losses.
• US Dollar Index stays above 93.50 ahead of FOMC Minutes.

The USD/CAD pair dropped to its lowest level since mid-January at 1.3134 on Wednesday but staged a decisive rebound in the last hour. As of writing, the pair was posting small daily gains at 1.3172.

USD gathers strength ahead of FOMC Minutes

The broad-based USD strength in the American session seems to be providing a boost to the pair. Although there were no fresh catalysts that could have ramped up the demand for the greenback, the US Dollar Index climbed above 92.50 and was last seen gaining 0.3% on the day at 92.58.

Later in the day, the FOMC will release its July Meeting Minutes. Previewing this publication, “markets are chiefly concerned about the governors’ forward view,” noted FXStreet analyst Joseph Trevisani. “Employment and economic growth are the Fed’s main concerns, followed at a discrete rhetorical distance by inflation. Pessimistic, optimistic or neutral whatever light the minutes can shed on the FOMC’s future sight will be taken as pronouncements by the trading markets.”

Meanwhile, crude oil prices gained traction in the last hour and the barrel of West Texas Intermediate turned positive on the day near $42.70, helping the commodity-related loonie limit its losses.

Saudi Arabia’s energy minister Prince Abdulaziz bin Salman said on Wednesday that they expect the world oil demand to recover to 97% of the pre-crisis level in the fourth quarter. Furthermore, the US Energy Information Administration (EIA) weekly report showed a draw of 1.6 million barrels in the US crude oil stocks in the week ended August 14th.

Technical levels to watch for