USD/CAD slides back closer to 1.3500 amid rising oil prices, weaker USD, ahead of US data
|- USD/CAD remains heavily offered on Wednesday and is weighed by a combination of factors.
- Rising crude oil prices underpin the Loonie and exert some pressure amid fresh USD selling.
- Traders now look to the US macro data for some impetus ahead of Fed Chair Powell’s speech.
The USD/CAD pair continues losing ground through the early North American session and retreats further from over a three-week high, around the 1.3645 zone touched the previous day. The downward trajectory drags spot prices back closer to the 1.3500 psychological mark and is sponsored by a combination of factors.
Crude oil prices extend this week's recovery momentum from the YTD low and gain some follow-through traction amid signs of tighter global supply. Furthermore, optimism over a Chinese demand recovery lifts the black liquid to a one-week high, which, in turn, is seen underpinning the commodity-linked Loonie. Apart from this, the emergence of some US Dollar selling exerts some downward pressure on the USD/CAD pair.
The greenback tracks sluggish US Treasury bond yields, weighed down by growing acceptance that the Fed will slow the pace of its policy tightening. In fact, the markets have fully priced in a relatively smaller 50 bps Fed rate hike move in December. This, along with signs of stability in the financial markets, dents demand for the safe-haven buck. The downside for the USD/CAD pair, however, is likely to remain limited.
The likelihood that OPEC+ will leave output unchanged at its upcoming meeting on Sunday could cap the upside for crude oil prices. Moreover, traders might refrain from placing aggressive bearish bets around the USD and prefer to wait for Fed Chair Jerome Powell's speech later during the US session. This, in turn, warrants some caution before positioning for any further depreciating move for the USD/CAD pair.
Ahead of the key event risk, traders will take cues from the US macro releases - the ADP report on private sector employment, Prelim Q3 GDP print and JOLTS Job Openings data. This, along with the US bond yields and the broader risk sentiment, might influence the USD and produce short-term trading opportunities around the USD/CAD pair.
Technical levels to watch
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