USD/CAD fails to hold above 1.33, retreats on oil recovery

• WTI erases majority of daily losses.
• US Dollar Index looks to close day above 96.
• Coming up: Canada inflation data on Friday.

The USD/CAD advanced to a 9-day high of 1.3318 earlier in the day but failed to preserve its bullish momentum as the loonie gathered strength on recovering crude oil prices. As of writing, the pair was trading at 1.3296, still up 0.3% on the day.

Earlier today, the barrel of West Texas Intermediate slumped below the $51 handle to weigh on the commodity-sensitive loonie. With Russian Energy Minister Novak saying that he would meet with his Saudi counterpart in Davos and that they would try to accelerate cuts in the oil output allowed crude oil to retrace its daily drop. As we approach the end of the day, the WTI looks to settle with small gains near the $52 mark.

In the meantime, the greenback's broad-based strength keeps the pair in the positive territory. Supported by today's upbeat macroeconomic data releases, the US Dollar Index pushed higher above the 96 handle before going into a consolidation phase in the late NA session. 

The U.S. Bureau of Labor Statistics reported that initial weekly jobless claims decreased by 3,000 to 213,000 in the week ending January 11. Additionally, the Philly Fed in its Manufacturing Survey revealed that the business activity in the manufacturing sector expanded at a more robust pace than expected.

On Friday, inflation data from Canada will be watched closely by investors. Previewing the report, "Headline inflation is likely to be depressed by the slump in energy prices, but this is unlikely to overly concern the Bank of Canada unless we also see a drag on core figures – a real risk given persistently weak wage growth," said ING analysts.

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