USD/CAD hits a fresh 6-week high as oil turns back below $45.00 mark

A sharp retracement in crude oil prices (back below $45.00 mark) helped the USD/CAD pair to build on to its recovery momentum and jump to a fresh 6-week high level.

Currently trading within striking distance of 1.3200 handle, the pair extended Tuesday's bullish break-out momentum above 200-day SMA. A softer tone around WTI crude oil prices, ahead of the weekly EIA report on US crude inventories, is seen weighing on the commodity-linked currency - loonie.

Adding to this a upbeat sentiment surrounding the greenback, on increasing prospects of an eventual Fed rate-hike action in 2016, is also supportive of the pair's recovery trend from last week's low of 1.2823 level. 

Next on tap is the release of import prices from the US ahead of a slew of economic releases of Friday. However, the pair's firm direction would be determined by the Fed's monetary policy outlook when it announces its monetary policy decision on September 21.

Technical levels to watch

On a sustained move above 1.3200 handle, the pair seems all set to extend its bullish trajectory further towards July swing high resistance near 1.3245-50 region, which if cleared would set the stage for continuation of the pair's up-move in the near-term. 

Meanwhile on the downside, 1.3140-30 zone (nearing session low) now seems to protect immediate downside, which if broken is followed by support at 1.3100 handle. Weakness below 1.3100 handle might now be short-lived and is likely to be bought into at 200-day SMA support near 1.3055-50 region.