USD/CAD finds support as oil recovery loses strength

The USD/CAD pair fell to a fresh session low at 1.3208 in the NA session and started to recover its losses after crude oil prices lost their bullish momentum, limiting the gains of the commodity-linked loonie against its rivals. As of writing, the pair is trading at 1.3242, still down 0.7% on the day.

After dropping to its lowest level since early November at $42.05 yesterday, the barrel of West Texas Intermediate staged a modest recovery on Thursday and advanced to $43.30. However, it failed to hold on to its gains above the $43 handle as there were no fresh developments to ease the concerns over the supply glut and is now trading at $42.70, up 0.5% on the day.

• Oil prices in bear market trajectory – Deutsche Bank

Moreover, the loonie received an additional boost after today's data from Canada revealed that retail sales rose 0.8% to $48.6 billion in April while and sales excluding motor vehicle and parts dealers climbed 1.5%, both beating the market expectation. 

• Canada: Retail sales rose 0.8% to $48.6 billion in April

On the other hand, the US Dollar Index continues to comfortably float above the 97 handle, making it difficult for the pair to sustain its bearish movement. The CPI data from Canada, which is expected to ease to 1.5% in May on a yearly basis, could be the next catalyst for the pair.

Technical outlook

1.3360/65 area, where the 200-DMA and Fib. 78.6% retracement of May 5/Jun. 14 fall meet, aligns as an important hurdle ahead of 1.3410 (Fib. 61.8%) and 1.3500 (psychological level). On the downside, supports could be seen at 1.3200 (psychological level), 1.3165 (Jun. 14 low) and 1.3100 (psychological level).