USD/CAD looks to close the day above 1.32 despite modest oil recovery

• WTI rebounds after EIA report on Wednesday.
• BoC's Lane argues that a lower CAD could support the economy.
• US Dollar Index pushes higher above 96.

Despite the modest recovery seen in crude oil prices in the second half of the day, the USD/CAD pair didn't have a difficult time extending its daily rally and now looks to close the day above the 1.32 mark for the first time in a week. After losing more than 1% in the day, the WTI gained traction on the back of the weekly EIA report, which showed a smaller-than-expected buildup in crude oil stocks, and settled 0.65% higher at $54. At the moment, the pair is up 0.54% on the day at 1.3203.

Earlier in the day, the Ivey PMI in Canada slumped to 54.7 in January from 59.7 in December and fell short of the market expectation of 56 to weigh on the loonie. Furthermore, in a speech delivered on Wednesday, Bank of Canada's Deputy Governor Timothy argued that a lower CAD could help the Canadian economy through the temporary slowdown. "The sharp CAD exchange rate movements have helped the economy to adjust to shocks previously," Lane further added.

Meanwhile, the greenback preserved its strength for the fifth straight day and provided an additional boost to the pair. The US Dollar Index, which tracks the buck against a basket of six major currencies, rose to its highest level in nearly two weeks at 96.40. Today's data from the U.S. showed that the international trade deficit declined more than expected in November and supported the DXY's upsurge.

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