- USD/CAD extends pullback from multi-year high, pressured of late.
- Oil prices print corrective pullback despite recession fears, API inventory build.
- Softer US data probes USD bulls ahead of key data/events, FOMC Minutes favored greenback buyers.
- Canada trade and Ivey PMI data to decorate calendar, recession is the key.
USD/CAD remains pressured around 1.3030, extending the previous day’s pullback from the highest levels since late 2020, as traders pare USD gains amid a quiet Asian session on Thursday. It’s worth noting that the bounce in the prices of Canada’s main export item, WTI crude oil also weighs on the Loonie pair.
USD/CAD printed mild gains on Wednesday, despite the broad US dollar strength and the weakness in the oil prices, as it retreated from the key resistance line around the multi-day high marked on Tuesday.
Also favoring the pullback could be the softer US data. That said, US ISM Services PMI for June dropped to 55.3 versus 55.9 in May. The actual figure, however, came in better than the market expectation of 54.5. It’s worth noting that the US JOLTS Job Opening for May declined to 11.25 million versus 11.00 million expected and 11.68 million prior.
While the softer US data initially allowed the bears to take a breather, the Federal Open Market Committee (FOMC) Minutes favored the pessimism as the Fed policymakers appear determined to announce another 75 basis points (bps) of a rate hike. That said, the latest Fed Minutes highlighted the need for the “restrictive stance of policy” while also saying, “even more restrictive stance could be appropriate if elevated inflation pressures were to persist”.
It should be noted that the WTI crude oil prices eyes to regain the $100.00 level, around $95.80 by the press time while bouncing off a three-month low of $93.20. In doing so, the black gold ignores the market’s fears of economic slowdown and a build in the US inventories, as per the weekly oil stockpile data from the American Petroleum Institute.
Against this backdrop, the US 10-year Treasury yields bounced off a three-week low to 2.93% but the higher print of the 2-year bond coupon, around 2.99%, hints at the global recession fears. The Wall Street benchmarks, however, closed with mild gains.
Given the market’s indecision, traders will pay attention to the monthly readings of Canada trade numbers and the Ivey Purchasing Managers Index for fresh impulse.
Technical analysis
Considering the USD/CAD pair’s sustained pullback from the two-month-old resistance line, around 1.3080 by the press time, the quote is likely to revisit the 10-DMA support of 1.2927.
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