USD/CAD turns positive at 1.3075 as oil resumes weakness

Weakness in crude oil prices assisted the USD/CAD pair to recover from session low near 1.3038 and move back into positive territory to currently trade around the very important 200-day SMA region.

Maintaining its high degree of correlation with crude oil prices, demand for the commodity-linked currency - Loonie, has been solely driven by sentiment surrounding the black gold. 

Wednesday's tepid recovery in the greenback did assist the pair initially but failed to provide further momentum as oil rebounded sharply to move back above $41.00 mark despite the EIA's weekly US crude oil inventory data showed a surprise rise in domestic stockpiles.

Attention now shifts to today's BOE monetary policy decision, which has the potential to trigger a fresh bout of volatility in the FX market and provide opportunity for short-term momentum play. Meanwhile, the key driver for the pair's near-term direction would remain Friday's monthly employment details from the US, NFP.

Technical levels to watch

Sustained move above 1.3080-85 region (200-day SMA) is likely to boost the pair immediately towards 1.3148 (yesterday's high), above which the pair is likely to face resistance at 1.3186 (July 29 high). On the flip side, weakness below 1.3038 (session low) could drag the pair immediately towards 1.3005 (Tuesday's swing low) ahead of 1.2950-45 strong support (100-day SMA).