USD/CAD: Rally continues amid strong USD and falling oil prices

The upside momentum for greenback stays intact, pushing USD/CAD towards 1.3400 area for the first time since early January.

USD supported by March rate hike expectations

Labor market conditions in the United States are tightening as reflected by latest weekly unemployment claims. According to the data published by Labor Department, the number of Americans filing for unemployment benefits fell to 223K for the week ended Feb. 24, the lowest number since 1973. Markets are pricing a 75% probability of a hike in March, up from 66% on Wednesday and 35% on Tuesday, based on CME Group’s FedWatch Tool.

WTI hurt by U.S. production

WTI remains under pressure, against the backdrop of expanding oil production in the United States. Crude oil inventories rose by 1.5 million barrels for the week to Feb. 24, less than market expectations of 3.079 million barrels, according to U.S. Energy Information Administration. However, further details of the report showed that U.S. crude production once again rose to 9.03 million bpd. 1.7% increase in refinery utilization rate seems to be the main cause of this growth. At the moment the barrel of WTI is losing 2.3% at $52.60.

Technical levels to watch

1.3400 psychological level is the first hurdle for the pair followed by 1.3460 (Fib. 78.6% - Dec.28 – Jan. 31 fall) and 1.36 (Dec. 28 high). The RSI indicator on the daily graph moved above 70, signaling a potential short-term correction. On the other hand, supports are aligned at 1.3360 (Fib. 61.8%), 1.3280 (Fib. 50%) and finally 1.32 (Psychological level/Fib. 38.2%).