USD/CAD eases off highs on oil rally, stays above mid-1.24s

• USD strength lifts USD/CAD to a daily high at 1.2480.
• WTI refreshes 3-year highs above $63.
• Weekly API stock report is next on the calendar.

The USD/CAD pair's bullish momentum lost strength in the US afternoon with the commodity-sensitive loonie showing resilience amid another sharp rise seen in crude oil prices. As of writing, the pair was trading nearly 20 pips below its daily highs, still up 0.3% on the day at 1.2460.

During the first half of the day, the barrel of West Texas Intermediate remained in a consolidation phase near the $62 handle, allowing the DXY to dictate the pair's price action. After closing the previous day above the 92 mark, the US Dollar Index extended its gains to a fresh 10-day high at 92.36. However, with the lack of new fundamental drivers, the index couldn't preserve its bullish momentum and was last seen moving sideways near 92.30, up 0.25% on the day.

On the other hand, crude oil prices gained traction in the last couple of hours with the barrel of West Texas Intermediate reaching its highest level since December of 2014 at $63.03. Although no clear catalysts were apparent behind that recent upsurge, the EIA's monthly report might have provided a boost. The EIA announced that it forecasts 2018 oil demand to grow by 470,000 bpd in the United States. Later in the session, the API is going to publish its weekly stock a report. A larger-than-expected draw in crude oil inventories could help the loonie retrace a part of its losses against the buck. 

• WTI bulls jumping the gun or more upside to come ahead of API?

Technical outlook

The pair could face the first hurdle at 1.2500 (psychological level) ahead of 1.2555 (Jan. 4 high) and 1.2625 (20-DMA). On the downside, supports could be seen at 1.2355 (Jan. 5 low), 1.2300 (psychological level) and 1.2230 (Sep. 20 low).