USD/CAD tests 1.31 on disappointing data from Canada

• Canadian building permits declined by 2.3% in June.
• Fed's Barkin says that they need to continue to raise rates.
• WTI falls toward $68.

With the initial reaction to the dismal macroeconomic data from Canada, the USD/CAD pair jumped to its highest level since July 25 at 1.3120 in the opening hour of the NA session before retreating a part of its gains. As of writing, the pair was trading at 1.3070, adding 0.15% on the day.

The monthly report released by Statistics Canada on Wednesday showed that building permits and house permits declined by 2.3% and 5.7% in June. On the other hand, while delivering his prepared remarks today, Richmond Fed President argued that the labor market in the U.S. was really tight and the inflation was at the Fed's target to suggest that they needed to continue to raise interest rates. Boosted by these hawkish comments, the US Dollar Index reached a fresh 2-day high at 95.42 and was last seen up 0.07% at 95.25.

Meanwhile, crude oil prices came under pressure after Iranian Foreign Minister Mohammad Javad Zarif stated that Iran would continue to export oil despite the United States' attempts to stop it. The barrel of West Texas Intermediate broke below the $69 mark and was last seen trading at $68.10, losing 1.4% on the day, and making it difficult for the commodity-related loonie to show resilience against its rivals. Later in the session, the EIA is going to publish its weekly crude oil stock report.

There won't be any macroeconomic data releases from the United States on Wednesday and investors will be watching the 10-year T-bond auction.

Technical outlook

The pair could encounter the first resistance at 1.3140 (50-DMA) ahead of 1.3200 (psychological level) and 1.3285 (Jul. 19 high/Jul. 20 high). On the downside, supports are located at 1.2995/1.3000 (100-DMA/psychological level), 1.2960 (Aug. 7 low) and 1.2920 (Jun. 8 low).