After several strong weeks of rallies that coincided with the rebound in oil USD/CAD saw its first major reversal today as the pair popped off the 1.3400 figure to rally towards the key 1.3500 level. The move higher was no doubt driven by the collapse in crude. After OPEC agreed to another 9 months of production cuts, oil slipped below the $50/bbl level and traded as low as $48/bbl in a classic sell the news dynamic.

The reaction in crude does not bode well for loonie which may see more weakness in days ahead especially if oil decides to test the $47/bbl before the end of the week. Tomorrow US data may also play a part especially if inflation reports print hotter than expected. Low inflation has been the primary concern of US policy makers with respect to rates and any upside surprise could unleash a dollar rally that could take USD/CAD towards the 1.3550 level.