USD/CAD plummets to 4-month lows as DXY approaches 96

After breaking below the 1.32 level in the early NA session, the USD/CAD remained under a heavy selling pressure and fell to its lowest level since late February at 1.3157. As of writing, the pair is trading at 1.3160, losing 83 pips, or 0.63%, on the day.

The greenback sell-off seems to be the primary reason behind the pair's fall. Although there were no significant data releases from the U.S., the upsurge of the EUR/USD pair hurt the overall demand for the USD, pushing the US Dollar Index to its lowest level since the U.S. election day in early November. Furthermore, recent dovish comments from Fed Chairwoman Janet Yellen weighed further on the index. Speaking in London with Nicolas Stern, the President of the British Academy and an economics professor, Yellen said that the productivity growth in the U.S. has been low and the inflation has continued to run below their objectives.

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On the other hand, after gaining a little more than 1% on Monday, the barrel of West Texas Intermediate continued to recover on Tuesday, adding more than 2%. At the moment, the barrel of WTI is trading at $44.27 (+2.05%), helping the commodity-linked loonie remain resilient against its rivals.

Technical outlook

The RSI indicator on the daily graph is at 25, showing oversold conditions in the short-term and suggesting that a technical correction could be on its way. On the downside, 1.3100 (psychological level/Feb. 21 low) could be the first target for the pair ahead of 1.3060 (Feb. 17 low) and 1.30 (psychological level). To the upside, resistances align at 1.3200 (psychological level), 1.3260 (daily high) and 1.3310 (Jun. 23 high).