USD/CAD pokes weekly top above 1.2500 amid US dollar rebound

USD/CAD advances to 1.2530, up 0.18% on a day, as bulls ignore the previous day’s pullback amid early Thursday.

The loonie pair probed a two-day uptrend on Wednesday after the Bank of Canada (BOC) stayed on the tapering path. However, a weaker than expected reduction in the bond purchase and sustained weakness in Canada’s key export item oil recall the pair buyers afterward.

The up-moves could also be attributed to the US dollar’s pick-up, backed by the downbeat market sentiment. That said, the US dollar index (DXY) consolidates the heaviest gains in a week around 92.40, up 0.05% intraday, by the press time.

It’s worth noting that the USD recovery exerts additional downside pressure on WTI oil prices that already drop for the second consecutive day on the Saudi-UAE deal.

Also weighing on the commodity prices and putting a safe-haven bid under the US dollar could be the coronavirus (COVID-19) woes in the West. The UK, unfortunately, refreshed the six-month high of the daily infections the previous day whereas Indonesia marked record top new cases on Wednesday. Further, Australia’s covid conditions are also grim and have already extended local lockdowns.

Against this backdrop, S&P 500 Futures drop 0.20% intraday whereas the US 10-year Treasury yields print decline two basis points (bps) to 1.33% by the time of the press.

Moving on, Canadian ADP Employment Change for June, prior 101.6K, should be read along with Fed Chair Powell’s second round of testimony, as well as covid updates, for fresh direction. Given the market’s lack of belief in the Fed’s sustained push for easy money and the BOC’s cautious remarks, not to forget WTI weakness, USD/CAD may remain on the front foot.

Technical analysis

Unless breaking a confluence of 100-DMA and an ascending support line from early June, around 1.2380-70, USD/CAD bears are less likely to seek fresh entries.