USD/CAD plummets to fresh 3-week lows below 1.27 on oil's rise

• WTI refreshed its highest level since June 2015 on Tuesday.
• DXY drops to monthly lows near mid-92s.

As traders returned after Christmas break, the USD/CAD pair came under pressure and slumped to its lowest level since December 5 at 1.2626. As of writing, the pair was trading at 1.2640, down 0.38% on the day.

Crude oil's sharp upsurge witnessed on Tuesday allowed the commodity-sensitive to gather strength with the trading volume picking up today. The barrel of West Texas Intermediate touched the $60 mark for the first time since mid-2015 and went into a consolidation phase. At the moment, the barrel of WTI is at $59.70, up nearly $1.5 for the week.

On the other hand, the greenback is suffering losses against its peers with the US Dollar Index remaining under pressure near mid-92s. The only data due from the United States will be the pending home sales and the Consumer Board's consumer confidence. Although positive data could allow the DXY to recover some of its recent losses, a decisive rise is unlikely amid the subdued trading action.

Technical levels to consider

The RSI indicator on the daily graph continues to push lower below the 50 mark, suggesting that the bearish momentum is gathering strength. 1.2600 (100-DMA) could be seen as the first technical support followed by 1.25 (psychological level) and 1.2450 (Oct. 19 low). On the flip side, resistances align at 1.2695/1.2700 (daily high/psychological level), 1.2775 (50-DMA), 1.2810 (200-DMA).