USD/CAD remains in range above 1.31 despite sharp WTI fall

• Weekly EIA report shows a surprise increase in crude inventories.
• Crude oil reacts negatively to the report.
• US Dollar Index stays in a tight range above 94 ahead of FOMC.

The USD/CAD pair continues to fluctuate near the lower band of its daily range in the NA session as investors refrain from taking large positions before the FOMC publishes minutes of its June meeting later in the session. As of writing, the pair was trading at 1.3130, down 0.13% on the day.

Earlier today, the data released by the ADP revealed that the private sector employment grew by 177K in May to miss the experts’ estimate of 190K. On the other hand, PMI data released both by Markit and the ISM showed that the business activity in the service sector expanded at a faster rate than markets were expecting. Following the mixed macro data, the US Dollar Index stays in the red a little above the 94 mark.

On the other hand, according to the weekly report published by the Energy Information Administration, crude oil stocks in the U.S. increased by 1.245 million barrels. The initial market reaction to the report dragged the barrel  of West Texas Intermediate to a fresh 3-day low at $72.92. At the moment, the barrel of WTI was down 50 cents on the day at $73.60.  

Although a fall in oil prices generally hurt the demand for the commodity-sensitive loonie,   a lack of interest for the greenback ahead of FOMC forces the pair to stay stuck in its  range.

“In terms of what to look out for, our US economists believe that discussion regarding trade developments and the flattening yield curve will be of note given recent comments by Fed officials. Regarding the former, many policymakers have mentioned this as a key risk to their outlook,” Deutsche Bank said in a recent report.

Technical outlook

Technical resistance for the pair could be seen at 1.3200 (psychological level/20-DMA), 1.3265 (Jun. 29 high) and 1.3350 (Jun. 28 high). On the downside, supports are located at 1.3110 (Jul. 4 low), 1.3025 (50-DMA) and 1.2925 (100-DMA).