USD/CAD recovers above 1.25 as greenback gathers momentum

After refreshing its lowest level in more than 14 months at 1.2480, the USD/CAD pair retraced its daily losses to turn positive above the 1.25 handle in the NA session. As of writing, the pair is trading at 1.2517, up 0.07% on the day.

Earlier in the day, rising crude oil prices kept the demand for the commodity-sensitive loonie high, weighing on the USD/CAD pair. However, the barrel of West Texas Intermediate, which leaped to a fresh daily high at $47.42, seems to have lost its bullish momentum in the last hour and is now trading at $47.20, still up $1, or 2%, on the day, allowing the pair to retrace its losses.

On the other hand, the greenback finally found some much-needed support from today's upbeat data from the U.S. Following a sudden drop to 93.50, the US Dollar Index reversed course and is now at 93.75, still down 0.07% on the day. The Consumer Confidence Index, released by the Conference Board, improved to 121.1 in July from 117.3 in June while the Richmond Fed Manufacturing Index advanced to 14 in July, beating the market expectation of 7.

Although there are no more data left in the remainder of the session, the Senate will be, once again, voting on the healthcare bill today around 18:15 GMT, which will be closely followed by the investors. Considering the market's negative reaction to the failure last week, we could assume that a positive outcome could help the greenback gain more strength against its rivals. On the other hand, participants are likely to refrain from taking any large USD positions in case of another disappointment. 

Technical outlook

In addition to the fundamental developments mentioned above, the fact that the pair has been moving below the 30 mark of the RSI indicator on the daily graph suggests that the bears are technically exhausted as well. 1.2500 (psychological level) is now the initial support ahead of 1.2460 (May 3, 2016, low) and 1.2365 (Jun. 2, 2015, low). On the upside, short-term could be seen at 1.2610 (10-DMA), 1.2670 (Jul. 18 high) and 1.2740 (20-DMA).

• USD/CAD Forecast by Kenny Fisher, Currency Analyst at MarketPulse