USD/CAD snaps two-day losing streak as US dollar gains beat WTI recovery

USD/CAD keeps the early-Asian recovery gains while trading around 1.3330, up 0.28% on a day, ahead of Wednesday’s European session. Amid a lack of domestic catalysts and the market’s emphasis on the US dollar gains, the loonie pair fails to take clues from the recent recovery in WTI, Canada’s biggest export item.

The American currency recovers from more than two year low amid hopes of US stimulus and vaccine news. US dollar index (DXY) prints four-day winning streak while taking the bids near 93.85, up 0.21% on a day, by the press time. Even if American Congress hasn’t yet started discussing the coronavirus (COVID-19) relief package, markets stay upbeat amid expectations that President Donald Trump will conquer any barriers as he recently did with executive orders for unemployment benefits. Talking about the vaccine, the Republican Leader Trump cited a deal with Moderna to mark his efforts to overcome the pandemic.

On the contrary, WTI fails to respect weekly inventory data from the private data provider the American Petroleum Institute’s (API). As per the latest upside, API Weekly Crude Oil Stock eased the previous declines in inventories while flashing a draw of -4.4M during the week ending on August 07. The reason could be traced from the market’s concerns that the US and China’s phase one deal is still on the table and can confront the virus-led economic slowdown. After yesterday’s upbeat comments from the People’s Bank of China’s (PBOC) Governor Yi Gang, China’s Vice Foreign Minister showed readiness to keep the trade talks on the table.

Elsewhere, RBNZ’s QE fails to derail market sentiment ahead of the US Consumer Price Index (CPI) data for July. The headlines inflation is expected to recover from 0.6% prior to 0.8% but the CPI ex Food & Energy (YoY) may recede from 1.2% to 1.1% during the reported month.

Other than the US CPI, traders will also keep eyes on the US-China trade news, virus updates and news on the US aid package for further direction.

Technical analysis

Bearish MACD and five weeks of continuous decline favor the USD/CAD bears. As a result, a confluence of 200-week SMA and an ascending trend line from February 2018, around 1.3175/70 become the landmark for traders. On the contrary, any pullback will be considered ephemeral unless crossing a downward sloping trend line from March high, at 1.3430 now.