USD/CAD rises above 1.25 on crude oil sell-off

The USD/CAD pair, which eased to a session low at 1.2490, gained traction in the last hour and broke above the 1.25 mark as the commodity-sensitive loonie started to lose strength amid a broad-based selling pressure witnessed on crude oil. As of writing, the pair was trading at 1.2521 gaining 0.1% on the day.

Russian energy minister Alexander Novak on Tuesday said that there was no immediate need to talk about a further extension of the oil output cut agreement. Moreover, Iraqi oil minister Jabbar al-Luaibi announced that they were planning to start rehabilitating Nineveh oil fields, signaling toward a higher oil output from the country. The barrel of West Texas Intermediate eased to a daily low of $50.20 and was last seen trading at $50.30, losing 0.4% on the day.

On the other hand, amid a lack of fresh fundamental catalysts, the US Dollar Index is having a difficult time extending its daily gains, not allowing the USD/CAD to rise further for now. After refreshing its highest level since August 17 at 93.78, the DXY erased its daily gains and is now flat around mid-93s.

The only data from the U.S. will be the ISM NY Index due at 13:45 GMT. Later in the session, the API will release the crude oil stock inventory change in the U.S. and a higher-than-expected build up could continue to weigh on crude oil prices and the loonie.

Technical outlook

With a daily close above the 1.25 mark, the pair could aim for 1.2600 (psychological level), 1.2630 (Aug. 30 high) and 1.2675 (100-DMA). On the flip side, supports could be seen at 1.2440 (50-DMA), 1.2400 (psychological level) and 1.2330 (20-DMA). The RSI indicator on the daily graph has more room on the upside before it reaches the 70 mark, pointing to a short-term bullish outlook.

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