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  • Crude oil fails to hold on to early recovery gains on Tuesday.
  • WTI trades at fresh 12-day lows, closes in on $21.
  • Broad-based USD weakness limits the pair’s upside for the time being.

After dropping toward mid-1.38s during the early trading hours of the European session, the USD/CAD pair erased its losses and turned positive on the day above the 1.39 handle as falling crude oil prices started to weigh on the loonie. As of writing, the pair was up 0.05% on a daily basis at 1.3910.

Oil selloff continues on demand outlook

Energy demand concerns amid worldwide lockdowns seem to be forcing crude oil prices to continue to weaken following a technical rebound earlier in the day. In its latest World Economic Outlook report, the International Monetary Fund (IMF) said it was expecting the global economy to contract by 3% in 2020 due to the coronavirus outbreak.

The barrel of West Texas Intermediate (WTI), which advanced to a daily high of $23.03, was last seen erasing nearly 5% on the day at $21.25. Later in the day, the American Petroleum Institue’s Weekly Crude Oil Stock could impact the WTI’s valuation.

On the other hand, the upbeat performance of US stock index futures makes it difficult for the greenback to find demand. With the US Dollar Index losing 0.5% to test the 99 handle, the pair’s upside remains capped for the time being.

The only data from the US on Tuesday revealed that the Import Price Index and the Export Price Index in March declined by 2.3% and 1.6%, respectively, but was largely ignored by the market participants.

Technical levels to watch for