USD/CAD reverses course ahead of 1.26 as greenback falters

The USD/CAD pair gathered momentum in the NA trading hours and refreshed its session high at 1.2592 but lost traction in the last minutes. As of writing, the pair was trading at 1.2553, up 0.11%, or 15 pips, on the day.

The pair's upsurge seems to be supported by a loonie weakness rather than a greenback strength. After yesterday's surprise stock build in the API report, which weighed on crude oil prices, today's inventory report, released by the EIA, showed that the U.S. weekly crude oil inventories decreased by 1.5 million barrels for the week ending July 28. However, this data failed to meet the market consensus of 2.95 million barrels and dragged the barrel of West Texas Intermediate to a fresh session low at $48.60, hurting the demand for the commodity-sensitive loonie.

• WTI retreats from highs post-EIA, near $48.70
• EIA: U.S. commercial crude oil inventories decreased by 1.5 mln barrels

On the other hand, the greenback is having a tough time holding in the positive area after some dovish comments from Cleveland Federal Reserve Bank President Loretta Mester. Mester on Wednesday said that there was a risk of overheating if interest rates remained too low. However, she also added that last couple of inflation prints were on the weak side and continued to run below Fed’s 2% goal. At the moment, the US Dollar Index is at 92.65, losing 0.3% on the day.

Technical outlook

If the pair remains above 1.2500 (psychological level) at the end of the day, it could aim for 1.2570 (Jul. 27 high) and 1.2650 (Jul. 19 high). On the flip side, supports could be seen at 1.2415 (Jul. 27 low), 1.2365 (Jun. 2, 2015, low) and 1.2300 (psychological level).