USD/CAD drops below 1.27 on oil rally

After spending the majority of the day trading in a narrow range above the 1.27 handle, the USD/CAD pair came under a renewed pressure in the early NA session and refreshed its daily low at 1.2673. As of writing, the pair was trading at 1.2767, losing 0.2%.

In the last hour, Khalid A. Al-Falih, Minister of Energy, Industry and Mineral Resources of Saudi Arabia, said that Iraq's strengthening commitment to the oil supply-cut agreement would reflect positively on the global oil market. Moreover, according to a recent Bloomberg article, OPEC increased its demand forecasts for 2017 and 2018 by 200,000 barrels a day, providing an additional boost to crude oil prices. As of writing, the barrel of West Texas Intermediate was trading at $50.05, gaining 1% on the day.

In the meantime, lower-than-expected PPI data from the U.S. dragged the US Dollar Index lower, making it difficult for the pair to correct its recent losses. According to the data released by the U.S.Bureau of Labor Statistics, PPI for final demand fell 0.1% in July after rising 0.1% in June and missed the market expectation of 0.1%. The DXY, which was able to march up to 93.70 before the NA session started, is now at 93.42, virtually flat on the day.

• US: PPI for final demand falls 0.1% in July; services decrease 0.2%, goods decline 0.1%

William Dudley, President of Federal Reserve Bank of New York, will be giving his remarks at the top of the hour, which could be the next catalyst for the greenback.

Technical outlook

1.2700 (psychological level/Jul. 17 high) could be seen as the first technical hurdle ahead of 1.2770 (Jul. 13 high) and 1.2800 (psychological level). On the flip side, supports align at 1.2620 (10-DMA), 1.2540 (Aug. 2 low) and 1.2500 (psychological level).