- WTI rebounds following Monday’s sharp drop, trades around $34.
- 10-year US Treasury bond yield erases weekly opening gap.
- US Dollar Index climbs to 96 area to limit pair’s downside.
The USD/CAD pair jumped to its highest level since May 2017 at 1.3758 on Monday as plummeting crude oil prices weighed heavily on the commodity-sensitive CAD. After closing the day at 1.3662, the pair seems to be having a difficult time preserving its bullish momentum on Tuesday and was last seen trading at 1.3652, down 0.36% on a daily basis.
Technical oil recovery
The barrel of West Texas Intermediate, which lost 27.3% on Monday after Saudi Arabia started a so-called “price war” by ramping up its production, was last seen trading at $34, adding 12.7% on the day. However, this rebound seems to be a reaction to Monday’s crash rather than a fundamentally-driven recovery. In fact, Russia’s Energy Minister Novak on Tuesday said they have the ability to hike oil production by 500 barrels per day.
On the other hand, the broad-based USD strength helps the pair keep its losses limited. The 10-year US Treasury bond yield erased the huge bearish gap registered at the opening on Tuesday and provided a boost to the greenback.
While the 10-year T-bond yield is adding 23% on the day, the US Dollar Index is up 0.85% on the day at 95.88. There won’t be any macroeconomic data releases from Canada in the remainder of the day. The only data featured in the US economic docket will be the weekly API Crude Oil Stock.
Technical levels to watch for
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