USD/CAD rebounds from 1.3500 as oil corrects, US Dollar regains control

The USD/CAD pair recovers swiftly as the downside momentum exhausts near the psychological support of 1.3500 in the London session. The Loonie asset rebounds to near 1.3530 as the oil price corrects after printing a fresh 10-month high near $91.00 and the US Dollar Index (DXY) regains control after a nominal correction from a six-month high at 105.40.

S&P500 futures generated nominal losses in the European session, indicating that the risk-on impulse is fading away. The US Dollar Index (DXY) resumes upside as the impact of upbeat economic data from the Chinese economy starts losing its appeal.

China’s annual Industrial Production rose by 4.5% and Retail Sales expanded by 4.6%, outperformed expectations. However, one-time robust economic data is insufficient to warrant economic growth in an economy.

The US Dollar Index prepares for a fresh upside despite the Federal Reserve (Fed) being expected to keep interest rates unchanged at 5.25-5.50% in its monetary policy scheduled for September 20. However, Fed policymakers are expected to keep doors open for further policy tightening as inflation in excess of the desired rate of 2% would be the hardest nut to crack.

Meanwhile, oil prices dropped after failing to continue the three-day winning streak. However, the broader term is still bullish as OPEC sees demand for oil rising on expectations of global recovery. It is worth noting that Canada is the leading exporter of oil to the United States and lower oil prices impact the Canadian Dollar.