USD/CAD inter-markets: bounces off 3-week lows, EIA report to provide fresh impetus

Having tested 3-week lows around 1.3575-80 region, the USD/CAD pair seems to have regained some traction and has now reversed all of its losses posted yesterday.

Currently trading around 1.3630 region, the pair moved higher despite of a persistent weaker tone surrounding the greenback. Against the backdrop of recent slew of lackluster US macro data, which seems to have faded expectations for faster Fed rate-tightening cycle, the latest political development in the US further aggravated the buck's bearish slide, dragging the key US Dollar Index to its lowest level since the US Presidential election.

Traders also shrugged off a recovery in oil prices, which tends to benefit the commodity-linked currency - Loonie. In fact, WTI crude oil reversed early losses, led by Tuesday's API report, and is now inching back closer to $49.00/barrel mark but did little to stall the pair's recovery move. 

Meanwhile, the prevalent risk-off environment, further reinforced by the ongoing slump in the US treasury bond yields, seems to be only factor supporting the greenback's safe-haven appeal against its Canadian counterpart. 

Moreover, repositioning trade ahead of the EIA report on domestic US crude oil inventories could also be attributed to the pair's recovery from lower level. With API report showing US inventories rose by 882k barrels last week, anticipated jump in the US oil inventories seems have also prompted bears to lighten their positions. Hence, it would be prudent to wait for the official release before committing to the pair's next leg of directional move.