A shocking API crude oil inventories report brought the bears out of hiding in the USD/CAD late Tuesday afternoon. A massive -8.363 million barrel draw on supply prompted an immediate and definitive 45 pip sell-off in the USD/CAD. This price action doomed yesterday’s long trade recommendation for the USD/CAD from just beneath 1.3100.

Such a miserable performance of a trade is humbling to say the least. But, it is a fantastic illustration of just how much a correlated market can influence value. The surprise draw reported by the API sent WTI crude oil to $70.00 and the USD/CAD crashing in short order. While the loss was fast and staggering, it did tell us just how much the Loonie currently depends on oil pricing.

USD/CAD Technicals

Tuesday’s correction in the USD/CAD has stalled out a bit as traders await the coming EIA oil stocks report. Thus far, this market has posted a tight intraday range in a non-committal area.

Here are the two levels to watch for the remainder of the session:

• Resistance(1): Bollinger MP, 1.3077
• Support(1): Daily SMA, 1.3034

Overview: Today’s price action is best described as “tightening” between support and resistance levels on the daily time frame. In the event that the EIA report brings a surprising metric, this market will be poised for a directional move later today.

After such a brutal beating, I like to take some time before re-entering the market where the loss occurred. It is tempting to go long now with a stop loss below the current session low and Daily SMA (1.3034). However, such a move is inherently risky, as the EIA crude oil stocks report may send this market directional. If you are involved with the Loonie going into the release, be sure to have your stops down and leverage in check.