USD/CAD ignores firmer oil prices to regain 1.3650, US/Canada GDP eyed

• USD/CAD picks up bids to snap two-day downtrend.
• US Dollar traces rebound in Treasury yields amid sluggish session.
• Hawkish Fedspeak, looming energy crisis and doubts over BOE keep buyers hopeful.
• Canada’s monthly GDP, final Q2 GDP for the US will join Fedspeak to entertain buyers.

USD/CAD recalls buyers after a two-day absence as the quote pokes 1.3650 during Thursday’s Asian session. In doing so, the Loonie pair benefits from the market’s sour sentiment and firmer yields while paying little heed to the upbeat prices of Canada’s essential export item, WTI crude oil.

WTI crude oil prices rise for the third consecutive day, up 0.40% intraday near $81.85 by the press time, as fears of a supply crunch supersede the recession woes. That said, the previous day’s risk-on mood and China’s efforts to propel the domestic markets to overcome slowdown fears also seem to favor the black gold prices.

Elsewhere, the People’s Bank of China (PBOC) marked the first increase in the onshore yuan fix in nine days and favored the sour sentiment. On the same line could be the markets’ doubts about the Bank of England’s (BOE) capacity to restore the British economic performance while keeping the recently criticized fiscal plan.

Furthermore, the looming energy crisis in Europe and Russia’s hesitance to respect the Western pressure joins firmer US data and hawkish Fedspeak to propel the USD/CAD prices.

That said, the US international trade deficit narrowed by $2.9 billion to $87.3 billion in August from $90.2 billion in July. Details suggest that the Exports dropped for the first time since January while Imports marked the fifth consecutive monthly decline. Further, Atlanta Fed President Raphael Bostic said on Wednesday that the baseline scenario right now includes a 75 basis points (bps) rate hike in November and a 50 bps increase in December, as reported by Reuters. Additionally, Chicago Federal Reserve President Charles Evans emphasized the need to address inflation and tried to renew the US dollar buying but could not due to the softer yields.

Amid these plays, the US 10-year Treasury bond yields pare the biggest daily loss in six months, allowing the US Dollar Index (DXY) to jump back towards the 20-year high marked the previous day. It’s worth noting that the S&P 500 Futures print mild losses and fades bounce off a 21-month low of late.

The monthly Canadian Gross Domestic Product (GDP) for July, expected -0.1% versus 0.1% prior, could keep the USD/CAD buyers hopeful. The run-up could gain more pace if the final readings of the US Q2 GDP improved from -0.6% initial estimates.

Technical analysis

A fortnight-old support line, around 1.3600 by the press time, restricts short-term USD/CAD downside considering the bullish MACD signals and upbeat RSI.