Intermarket analysis: USD/CAD on the defensive as oil rallies

USD/CAD extended losses into a fourth consecutive day on Wednesday, striking a 5-week low sub-1.2700 with sharp oil advance as the main driver behind the move.

WTI futures broke above $51 a barrel supported by API data which showed US crude supplies decreased by 3.6 million barrels last week. The US Energy Information Administration will publish its official data later on Wednesday.

With oil prices having  almost doubled in value since hitting decade lows earlier this year amid easing concerns of a global glut, Canada’s economy, as a major oil exporter, and the loonie have benefitted from higher prices.  

Among other drivers, fading hopes of a June rate hike by the Fed continue to weigh broadly on the US dollar.

However, the Canada-US 10-year bonds yield spread has moved in the opposite direction, favoring the US dollar on Wednesday.