USD/CAD looks to regain 1.3600 despite firmer Oil price as US Dollar rebounds ahead of key data

USD/CAD consolidates the biggest daily loss in a month while posting mild gains around 1.3575 ahead of Wednesday’s European session. In doing so, the Loonie pair prints the first daily run-up, so far, despite upbeat prices of Canada’s main export item, namely the WTI crude oil. The reason could be linked to the US Dollar’s recovery ahead of the top-tier US data.

That said, the WTI crude oil renews weekly top around $81.40 amid expectations of witnessing more stimulus from China, as well as higher demand due to the adverse weather conditions in the West. Additionally, a heavy draw of the US inventories, per the American Petroleum Institute’s (API) weekly Crude Oil Stocks Change data, also underpins the black gold’s run-up.

Elsewhere, the US Dollar Index (DXY) rises 0.20% to around 103.65 by the press time, reversing the previous day’s losses, the biggest in six weeks, amid the market’s preparations for the key data/events. Also likely to have triggered the DXY rebound are the sluggish Treasury bond yields and doubts about the US-China ties.

It’s worth noting that the previous day’s US consumer confidence, employment and housing data flagged fears of the Fed’s policy pivot, especially after Fed Chair Jerome Powell highlighted the data-dependency for future moves to defend the hawkish bias. The same drowned the Greenback and the US Treasury bond yields.

However, the cautious mood ahead of today’s US ADP Employment Change, the final readings of the US second quarter (Q2) Gross Domestic Product (GDP) and the Personal Consumption Expenditure (PCE) data triggered the US Dollar’s corrective bounce. Furthermore, the US Treasury bond yields remain sidelined at a two-week low after reversing from the multi-year high in the last few days.

Additionally helping the USD/CAD buyers are the mixed concerns about the US-China ties. China recently conveyed its dislike for the US Commerce Secretary Gina Raimondo’s complaints about the hardships for the US firms in China. Previously, chatters about the early rate cuts from the People’s Bank of China (PBoC) and a cut into the mortgage rates, as well as likely improvement in the US-China ties, favored the market’s optimism. It should be noted that the International Monetary Fund’s (IMF) readiness to be more cautious while allocating the Special Drawing Rights (SDRs) in the future, due to the current environment of higher interest rates and inflation, also seems to renew the US Dollar’s demand.

Amid these plays, the US stock futures print mild gains and prod the riskier assets, which in turn propel the USD/CAD prices.

Technical analysis

USD/CAD recovery remains elusive unless providing a daily closing beyond a four-month-old resistance line, around 1.3605 by the press time.