USD/CAD hits two months highs above 1.3300 as crude oil tumbles

• Loonie drops across the board during the American session amid a decline in crude prices. 
• USD/CAD accelerates rally, gains for the fourth consecutive day. 

The USD/CAD pair rose further during the American session and climbed to 1.3302, the highest level since early December. Near the end of Monday, it trades around 1.3300, holding to most daily gains, up for the fourth day in a row. 

WTI down, DXY consolidates gains 

The decline in crude oil prices played a critical role in the decline of the loonie across the board. WTI prices dropped 2.65%, to $50.00 per barrel, the lowest in a year. Estimations about a reduction in the Chinese crude demand by as much as 20% on the back of the coronavirus, weighed significantly on prices. From the peak of January 8 above $65.00, the barrel lost $15, and the technical outlook suggests more losses are likely. 

The recovery of the US dollar added strength to the USD/CAD. The DXY is up 0.42%, erasing most of Friday’s losses. The Index climbed to 97.80, moving away from the two-week low it reached last week. US manufacturing data came in better-than-expected and contributed to the rally of the greenback. 

Technical outlook 

The USD/CAD is showing overbought technical conditions, although the consolidation on top of 1.3260 shows the bullish momentum intact. If the pair rises and holds above 1.3305, it would likely rise to test the next barrier seen at 1.3325/30 (November highs).

If the pair pulls back, the immediate support is seen at 1.3260; a slide below would alleviate the bullish pressure. The next support might lie at 1.3220.