The correlation between WTI crude oil and the Canadian dollar weakened once again on Thursday.  The loonie strengthened even as a US government report showed that the national inventory actually climbed in the week – helping crude oil futures to hold onto losses throughout most of the session.

According to reports by the Energy Information Administration, crude oil inventories had risen by 1.3million barrels for the week ending October 7th – much to the surprise of the market.  The results were a wider than expected jump in inventories, with market estimates of a 300,000 barrel weekly decline.  The report also showed a drop in distillates and gasoline supplies – with distillate supplies declining by 2.9 million barrels and gasoline stockpiles dropping by 4.1 million barrels.

The bearish report helped November crude oil futures to drop by as much as 1.8% following the announcement to trade at $84 a barrel on the NYMEX.

Surprisingly, the announcement helped to support a higher Canadian dollar against the greenback – as profit taking on the morning’s run up helped the loonie major gain.  Now trading at 1.0206, the USDCAD currency pair is set for another leg lower in the short term 5-minute timeframe.  The currency price has broken through key support levels at 1.0235 (50 SMA) and 1.0222 (100 SMA).

But, even as the currency pair may be headed for a lower exchange rate, traders are anticipating a retest of the 1.0222 resistance barrier before any new lows can be established.