USD/CAD slumps to lowest level in more than 14 months on oil rally

The USD/CAD pair plummeted to its lowest level since the first week of May 2016, at 1.2578 after crude oil prices gained traction on the EIA data in the NA session. As of writing, the pair was trading at 1.2590, losing 0.3% on the day.

According to the weekly report released by the EIA, commercial crude inventories in the U.S. decreased by 4.7 million barrels for the week ending July 14, surpassing the market consensus of a 3.2 million barrels decrease. Following the report, the barrel of West Texas Intermediate leaped to its highest level in two weeks at $47.20, allowing the commodity-sensitive loonie to gather strength against its competitors. As of writing, the barrel of WTI is trading at $47, gaining 1.25% on the day. Furthermore, the manufacturing sales data from Canada, which showed a 1.1% increase in May, kept the pressure alive on the pair in the early NA session.

• WTI leaps to session tops above $47.00 on EIA
• EIA: U.S. commercial crude oil inventories decreased by 4.7 mln barrels

On the other hand, the fact that the greenback hasn't been able to make a meaningful recovery after yesterday's steep fall continues to weigh on the USD denominated assets as well. At the moment, the DXY is at 94.55, up 0.12% on the day.

Tomorrow's economic calendar won't be featuring any data from Canada while the U.S. docket will offer the weekly jobless claims numbers, which are unlikely to impact the pair's movements. Oil prices could continue to drive the price action in the short-term. 

Technical outlook

The RSI on the daily graph for the pair continues to stay well below the 30 mark, suggesting that the pair hasn't corrected its oversold reading yet. On the upside, the initial resistance could be seen at 1.2700 (psychological level) followed by 1.2770 (Jul. 13 high) and 1.2860 (20-DMA). To the downside, short-term supports are located at 1.2500 (psychological level), 1.2460 (May 3, 2016, low) and 1.2365 (Jun. 2, 2015, low).