USD/CAD rebounds from multi-month lows, struggles to climb above 1.3100

• Manufacturing sector in the US gathers momentum in October.
• US Dollar Index extends recovery on upbeat PMI data.
• WTI trades at fresh multi-week highs above $56.

The USD/CAD pair slumped to its lowest level since July 22nd at 1.3050 earlier in the day as rising crude oil prices allowed the Loonie to continue to outperform its major rivals. However, with the Greenback gathering strength on the back of upbeat Purchasing Managers’ Index (PMI) data from the United States, the pair recovered from its lows but struggled to break above the 1.31 handle. As of writing, the pair was trading at 1.3085, up 0.15% on a daily basis.

USD gathers bullish momentum on upbeat data

The IHS Markit’s preliminary PMI report for October revealed that the economic activity in the manufacturing sector is expected to expand by a more robust pace than expected with the Manufacturing PMI  improving to 51.5 and beating the market estimate of 50.7.

The US Dollar Index, which spent the first half of the day moving sideways near 97.50, gained traction on the back of upbeat PMI reading and was last seen adding 0.22% on the day at 97.67.

Meanwhile, heightened expectations of OPEC and its allies opting out for deeper production cuts at the next meeting in December and larger-than-expected draw in the US crude oil stocks this week fueled crude oil’s rally. As of writing, the barrel of West Texas Intermediate was up 0.5% on the day at $56.15.

There won’t be any significant macroeconomic data releases from Canada or the United States on Friday and crude oil prices and USD’s performance are likely to continue to drive the pair’s action.

Technical levels to watch for