- USD/CAD bulls take a breather around weekly top after three-day uptrend.
- Oil fails to justify geopolitical concerns relating to Iran amid downbeat inventories, covid woes.
- Easy Canadian PMI, firmer US Factory Orders favored bulls on late Tuesday.
- US ISM Services PMI, ADP Employment Change will be crucial to watch.
USD/CAD seesaws around 1.2530, following a three-day rebound from the monthly low, amid Wednesday’s Asian session. In doing so, the loonie pair follows the sidelined oil prices during a quiet Asian session ahead of the key US data.
That said, the quote refreshed weekly top the previous day following the second day of downbeat oil prices, not to forget softer activity data at home versus better-than-forecast US Factory Orders.
Prices of Canada’s main export, WTI crude oil, have dropped around 5.0% so far during the week as concerns over economic recovery, due to the Delta covid variant’s spread, weigh on energy demand. In addition to the virus fears, downbeat inventory data from the American Petroleum Institute (API) also weigh on the quote as the stockpiles improved from -4.728M versus -0.879M prior. It should be noted, however, that the Western tussles with Iran and China should have ideally helped the black gold but did not.
It’s worth noting that the COVID-19 woes battle stimulus hopes and pre-data caution to add extra filters to the USD/CAD moves amid an inactive session. That said, S&P 500 Futures drop 0.16% despite Wall Street’s upbeat close whereas the US 10-year Treasury yields remain sluggish around 1.18%.
Moving on, US ADP Employment Change for July, an early signal for Friday’s US Nonfarm Payrolls (NFP), as well as ISM Services PMI will be the key to follow. Further, China’s Caixin Services PMI and EIA’s Weekly Oil Stock Change numbers offer extra catalysts to watch for fresh impulse.
Technical analysis
Although the monthly horizontal area surrounding 1.2420 restricts short-term USD/CAD downside, bulls need a clear break of the 200-DMA, near 1.2590 by the press time, to keep the reins.