USD/CAD pushes lower below 1.26 on sudden oil rally

After breaking below the 1.26 handle on the Canadian inflation data in the early NA session, the USD/CAD pair went into a consolidation phase before coming under pressure again in the last hour. The pair, which refreshed its 2-week low at 1.2560, is now trading at 1.2570, losing more than 100 pips, or 0.85%, on the day.

• Canada: CPI rose 1.2% on a year-over-year basis in July, following a 1.0% gain in June

This recent downfall seems to be a product of a sharp upsurge witness in crude oil prices. As of writing, the barrel of West Texas Intermediate was trading at $48.28, gaining $1.2, or 2.5%, on the day. The fact that no clear fundamental triggers were seen behind that move suggests that it could have been caused by the week end flows. 

On the other hand, the US Dollar Index remains in the red in the last session of the week as investors refrain from taking large USD positions amid political turmoil in the U.S. According to a recent article written by Jonathan Swan of Axios, White House chief of staff John Kelly is preparing a review on Steve Bannon, a White House Senior Adviser, which could result in him losing his position. Nevertheless, the index is holding onto moderate gains this week but could have a tough time extending this move in the near-term.

Technical outlook

1.2500 (psychological level) could be seen as the first technical support ahead of 1.2460 (May 3, 2016, low) and 1.2415 (Jul. 27 low). On the upside, resistances are located at 1.2680 (10-DMA), 1.2755 (50-DMA) and 1.2800 (psychological level).