USD/CAD edges higher ahead of American session, trades above 1.3070
|- US/DCAD stays in a consolidation phase after dropping below 1.3000.
- US Dollar Index extends recovery beyond 92.60 on Wednesday.
- Focus shifts to Fed speakers, ADP jobs report.
The USD/CAD dropped below 1.3000 for the first time since January on Tuesday but staged a late rebound and snapped a five-day losing streak. With the greenback preserving its strength against its peers, the pair edged slightly higher on Wednesday but continues to trade in a relatively tight range. As of writing, USD/CAD was up 0.11% on the day at 1.3076.
DXY continues to erase last week's losses
The upbeat Manufacturing PMI data from the US helped the USD find demand on Tuesday. After slumping to its lowest level in more than two years at 91.75, the US Dollar Index (DXY) reversed its direction and closed in the positive territory. Ahead of the ADP Employment Change data, the DXY extended its rebound and is now up 0.4% on the day at 92.67.
Previewing the ADP report, “the Federal Reserve’s new inflation averaging policy will have no material effect on the actual fed funds rate but it has given the market a new reason to short the dollar," noted FXStreet analyst Joseph Trevisani. “Until the US economy produces a string of good results, particularly from the labor market, it will be difficult to replace that double scenario against the dollar.”
On the other hand, the Labor Productivity for the second quarter will be the only data featured in the Canadian economic docket. Meanwhile, the barrel of West Texas Intermediate is trading flat on the day near $43, leaving USD/CAD at the mercy of USD's market valuation.
Technical levels to watch for
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