USD/CAD drops towards 1.27 handle after EIA report

The USD/CAD pair is moving lower towards the 1.27 handle in the early NA session as the greenback is struggling to extend its daily gains ahead of the FOMC minutes. As of writing, the pair was trading at 1.2707, losing 0.4% on the day.

After touching the 94 mark in the early NA session, the US Dollar Index started to retrace its daily earnings after the macro data from the U.S. came in below the market estimates. Housing starts in the U.S. contracted by 4.8% on a monthly basis in July following a solid 8.3% expansion in June. Moreover, building permits decreased by 4.1%, missing the expectations of -2%. At the moment, the index is at 93.83, up 0.1% on the day. 

On the other hand, crude oil prices, which impact the demand for the commodity-sensitive loonie, are fluctuating sharply in the session on the back of the U.S. crude oil supply report released by the Energy Information Administration. According to the weekly report, commercial crude oil inventories decreased by 8.9 million barrels for the week ending August 11, 2017. However, after spiking up to $48 level with a knee-jerk reaction to the data, the barrel of West Texas Intermediate struggled to rise higher and is now trading at $47.70, up 0.3% on the day.

• WTI apathetic on EIA, still below $48.00
• EIA: US commercial crude oil inventories decreased by 8.9 mln barrels

Later in the session, the FOMC is going to release its July meeting minutes. Although no major announcements are expected, investors will be looking for clues on the precise timing of the balance sheet reduction.

Technical outlook

The pair faces the initial support at 1.2695/1.2700 (10-DMA/psychological level) ahead of 1.2650 (Aug. 11 low) and 1.2555 (Aug. 4 low). On the flip side, resistances align at 1.2785 (50-DMA), 1.2900 (psychological level) and 1.2940 (Jul. 12 high). The RSI on the daily graph eased back to the 50 mark, suggesting that the bullish momentum is losing strength.