USD/CAD erases majority of daily gains on oil rally, returns to mid-1.24s

• WTI surges above $64 in the NA session.
• DXY refreshes multi-year lows below 90.
• API crude oil stock data is coming up next from the U.S.

After rising toward the 1.25 handle during the first half of the day amid a modest recovery seen in the greenback, the USD/CAD pair reversed course during the American trading hours and retraced its daily rise to turn negative below mid-1.24s. At the moment, the pair is trading at 1.2450, up only 5 pips on the day.

The commodity-sensitive loonie gathered strength against its rivals earlier in the session after crude oil prices gained traction on the back of comments from Saudi Arabia's energy minister Al-Falih. Speaking to reporters on the sidelines ahead of an OPEC event, Al-Falih said that many producers were in agreement on extending the supply cut deal. The barrel of WTI was last seen trading at $64.40, where it was adding 1.3%.

On the other hand, the US Dollar Index came under a renewed pressure in the NA session and renewed its lowest level in more than three years at 89.85. A sharp sell-off seen in the US T-bond yields and disappointing Richmond Fed Manufacturing Index data seemed to be the primary driver of the DXY's action. With the 10-year T-bond yield recovering some of its losses, the US Dollar Index was able to move away from the recently-set multi-year lows. At the moment, the index is moving sideways near the 90 handle, losing 0.15% on the day.

Later in the session, the API is going to release its weekly report of crude oil stocks in the U.S. and a larger-than-expected draw in inventories could provide crude oil prices an additional boost.

Technical outlook

The pair could face the first technical support at 1.2405/00 (Jan. 15 low/psychological level) ahead of 1.2355 (Jan. 5 low) and 1.2255 (Sep. 22 low). On the upside, resistances are located at 1.2500 (psychological level), 1.2580 (Jan. 10 high) and 1.2650 (100-DMA/50-DMA).