USD/CAD erases majority of daily gains on oil recovery, trades above 1.31

• WTI gains traction ahead of API data to help CAD find demand.
• Greenback continues to outperform its rivals despite mixed data.
• US Dollar Index climbs to highest level since June 18.

The USD/CAD pair climbed to its highest level since late June at 1.3164 today but came under modest bearish pressure in the last couple of hours as the commodity-related Loonie took advantage of rising crude oil prices. As of writing, the pair was trading at 1.3135, adding 0.12% on a daily basis.

Earlier today, the data from the U.S. showed that the Philly Fed's Non-Manufacturing Index jumped to 21.4 in July from 8.2 in June. However, other data revealed that existing home sales declined by 1.7% on a monthly basis in June and the Richmond Fed Manufacturing Index slumped to -12 in July to miss the market expectation of 5.

Nonetheless, rising U.S. Treasury bond yields and the selling pressure surrounding major European currencies allowed the USD to find demand and outperform its rivals, lifting the US Dollar Index to its highest level in five weeks at 97.71. At the moment, the index is up 0.4% on the day at 97.69.

Oil rally helps CAD find demand

Despite the broad USD strength, a sharp rebound witnessed in crude oil prices made it difficult for the pair to continue to push higher. The barrel of West Texas Intermediate, which spent a large portion of the day moving sideways near the $56 mark, gained traction in the last hour following news of the UK pushing for a joined effort with European nations such as France, Denmark, Italy and the Netherlands as well as from Germany, Spain, Sweden and Norway to establish a safe-shipping passage in the Straight of Hormuz. As of writing, the barrel of WTI was up 1% on the day at $56.75.

Later in the session, the weekly crude oil stock report published by the American Petroleum Institue will be looked upon for fresh impetus.

Technical levels to watch for