USD/CAD erases gains towards 1.25 on post-EIA oil rally

The USD/CAD started to pull away from its session high of 1.2530 during the first half of the NA session as the commodity-sensitive loonie gathered strength on rising crude oil prices. As of writing, the pair is trading at 1.2515, still up 0.07% on the day.

Today's data from the U.S. Energy Information Administration showed that the U.S. commercial crude oil inventories decreased by 7.2 million barrels for the week ending July 21. Further details of the report also revealed that the daily oil production contracted by 0.2% to 9.410 million barrels from 9.429 million barrels. Following the data, the barrel of West Texas Intermediate renewed its peak price since early June at $48.86. At the moment, it's trading at $48.70, up 1.7% on the day.

• EIA: U.S. commercial crude oil inventories decreased by 7.2 mln barrels

However, the pair is struggling to gather a strong bearish momentum as the greenback remains bid on the session with the US Dollar Index re-testing the 94 handle. Later in the day, the FOMC will release its monetary policy statement, which could be the catalyst for the USD. Today's FOMC meeting won't be 'live', which means there won't be a press conference after the Committee releases its statement. Although the market reaction is expected to stay limited, a fresh hint towards the timing of the balance sheet reduction could bring some volatility.

• FOMC Preview: 12 major banks expectation from July meeting

Until Friday's GDP data, Canada won't be releasing any significant data and crude oil prices and the DXY could continue to drive the price action.

Technical outlook

The pair might need to make a daily close below 1.2500 (psychological level) to extend its downfall. 1.2460 (May 3, 2016, low) and 1.2365 (Jun. 2, 2015, low) could be seen as next support levels. On the flip side, resistances align at 1.2575 (10-DMA), 1.2670 (Jul. 18 high) and 1.2715 (20-DMA).