USD/CAD remains in the red below mid-1.28s as crude oil extends recovery

• WTI gains traction post-EIA report.
• DXY struggles to retake the 93 mark.
• USD/CAD remains on track to close the day with losses.

After refreshing its highest level in more than four months at 1.2920 on Tuesday, the USDCAD pair failed to build on its gains and reversed course on Wednesday. As of writing, the pair was trading at 1.2835, losing 0.35% on the day.

After the weekly EIA report showed a larger-than-expected draw in crude oil inventories in the U.S., the barrel of West Texas Intermediate gained traction and broke above the $58 mark for the first time since December 12, helping the commodity-linked loonie to gather strength against its rivals. At the moment, the barrel of WTI is trading at $58.10, up nearly 1% on the day.

On the other hand, the greenback, which came under a broad-based pressure at the beginning of the NA session remains in the negative territory even though the Republican-controlled U.S. House approved the biggest tax overhaul in more than three decades and sent the bill to President Trump to sign. Some market speculation earlier in the session suggested that Trump might delay signing the bill until January but he recently tweeted out a GIF of a gift box opening and revealing the text "tax cuts for Christmas." Nonetheless, with the trading volume thinning out ahead of the holiday season, the choppy trading action doesn't allow the DXY to make a meaningful recovery.

Technical outlook

A daily close below 1.2830 (200-DMA) could trigger a deep sell-off and push the pair lower toward 1.2785 (50-DMA) and 1.2700 (psychological level). On the upside, resistances could be seen at 1.2880 (daily high), 1.2915 (Oct. 31 high) and 1.3000 (psychological level).