USD/CAD pares early losses, holds above 1.2620 ahead of Canada CPI data

• USD/CAD staged a modest rebound after declining to 1.2600.
• Crude oil prices are rising ahead of EIA inventory data.
• Focus shifts to July inflation report from Canada.

After closing the first two trading days of the week in the positive territory and reaching its strongest level in three weeks at 1.2650, the USD/CAD pair seems to have gone into a consolidation phase. Following a technical correction to 1.2600, the pair managed to erase its losses and was last seen trading flat on the day at 1.2628.

Eyes on Canada CPI data, FOMC Minutes

The broad-based USD strength and falling crude oil prices allowed USD/CAD to gather bullish momentum. Supported by safe-haven flows, the US Dollar Index rose above 93.00 for the first time in a week on Tuesday.

On the other hand, renewed concerns over a shaky recovery in global energy demand weighed on crude oil prices and the barrel of West Texas Intermediate (WTI) closed the first straight trading day in the negative territory on Tuesday. Ahead of the EIA's weekly Crude Oil Stocks Change data, the WTI is up 1% on the day at $67.20, helping the commodity-related loonie show some resilience against its rivals.

Later in the session, the July Consumer Price Index (CPI) data from Canada will be looked upon for fresh impetus. Later in the day, the FOMC will release the minutes of its July meeting. 

FOMC Minutes July Preview: More new questions than answers.

Technical levels to watch for