USD/CAD marches towards 1.3000 as yields propel DXY, oil eases ahead of Canada Retail Sales

USD/CAD buyers approach the monthly high while refreshing the daily peak around 1.2970 during the initial hour of Friday’s European trading session. In doing so, the Loonie pair takes clues from the firmer US dollar, as well as softer prices of Canada’s main export item, namely WTI crude oil.

That said, the US Dollar Index (DXY) run up towards refreshing the monthly top near 107.70 as the market’s fears of economic slowdown in China and Europe, the Sino-American tussles, as well as hawkish Fedspeak. While underpinning the greenback’s gauge, the US 10-year Treasury yields reverse the previous day’s retreat from the monthly high to 2.928% by the press time, renewing a one-month high.

Elsewhere, WTI crude oil remains pressured around the intraday low of $89.30 as fears of economic slowdown weigh on the energy benchmark. Also exerting downside pressure on the black gold is the firmer US dollar and hopes that the Organization of the Petroleum Exporting Countries (OPEC) and allies, collectively known as OPEC+, could ease the output crunch, as recently signaled by Saudi Arabia.

On Thursday, Philadelphia Fed Manufacturing Survey rallied to 6.2 for August versus -5 expected and -12.3 prior while the weekly Initial Jobless Claims dropped to 250K, below 265K market consensus and 252K revised prior.

Following the data, San Francisco Fed President Mary Daly backed either 50 basis points or a 75 basis points hike while signaling the move for the September rate decision whereas Minneapolis Federal Reserve Neel Kashkari mentioned that, per Reuters, he does not believe the county is currently in a recession. Further, the all-time hawk St. Louis Fed President James Bullard said he is leaning towards another 75 bps rate hike in September.

Looking forward, Canadian Retail Sales for July, expected 0.3% MoM versus 2.2% prior, will be important for intraday USD/CAD traders. However, the market’s anxiety ahead of next week’s Fed Chair Jerome Powell’s speech at the Jackson Hole Symposium could keep the Loonie pair directed towards the north.

Technical analysis

The firmer RSI (14) and the bullish MACD signals join the pair’s successful trading above the 21-DMA level of 1.2860, as well as the one-week-old support line near 1.2880, to keep USD/CAD bulls hopeful. That said, a downward sloping resistance line from July 19, close to 1.2980-85 challenges the intraday buyers ahead of the 1.3000 psychological magnet.