USD/CAD draws offers as oil remains bid

• The Canadian dollar is gaining ground on oil price strength. 
• Wednesday's candle suggests indecision in the market place. 
• The bulls need to defend Tuesday's low of 1.3609.

USD/CAD is flashing red in Asia with oil extending Monday's recovery rally and strengthening the bid tone around the Canadian dollar. 

At press time, the pair is trading at 1.3718, representing a 0.10% loss on the day, having hit a high of 1.3746 in early Asia. 

Meanwhile, West Texas Intermediate (WTI) oil is trading at $35.16, up 2.4 percent on the day and Brent is changing hands at $38.50, representing a 1.5% gain on the day. 

The black gold jumped more than 10% on Tuesday on reports that ongoing talks between OPEC and its allies, known as OPEC+, remain possible. Notably, Russia's Energy Minister Alexander Novak said Tuesday that Moscow had not ruled out measures with OPEC to stabilize oil markets. 

However, with both Russia and Saudi Arabia looking to boost output, risks for oil prices remain skewed to the downside, more so, as global economic growth is expected to slow down due to coronavirus fears. Bank of America has cut its forecast for 2020 global growth to 2.2% from 2.8%. 

If oil reverses lower during the day ahead, the CAD will likely come under pressure. That possibility cannot be ruled out, as the futures on the S&P 500 are currently signaling risk aversion with a 2% drop. 

Focus on today's close

The USD/CAD pair produced a big spinning top candle on Tuesday, signaling indecision in the market place following a near 90-degree rally from 1.2950 to 1.38. 

As a result, Wednesday's close is pivotal. A spinning top bearish reversal would be confirmed if the pair ends below 1.3609 (Tuesday's low). On the other hand, a close above 1.38 (Tuesday's high) would imply a continuation of the recent rally. 

Technical levels