USD/CAD stays pressured around 1.2650 on firmer oil prices ahead of US inflation
- USD/CAD holds lower ground after declining the most in over a week.
- Geopolitical fears, stimulus/vaccine hopes back oil prices to refresh six-week top.
- DXY closed mixed as weaker Treasury yields probe bulls near monthly low.
- US CPI for August becomes the key amid Fed tapering concerns.
USD/CAD bears take a breather following the heaviest daily fall in eight days, grinds lower near 1.2650 during the early Tuesday morning in Asia. While firmer oil prices keep the pair bears hopeful, Fed tapering chatters ahead of the key US Consumer Price Index (CPI) restrict the Loonie pair’s downside of late.
Hurricane Ida, typhoon Chanthu and tropical storm Nicholas could be held responsible for propelling the oil prices towards a fresh multi-day high above $70.00, around $70.45 by the press time. Also on the positive side was North Korea’s missile test and China’s recently assertive behavior with the global leaders, signaling supply crunch and demand improvement respectively. On the same line were hopes of the US stimulus and jump in covid vaccinations.
Also positive for the Canadian Dollar (CAD) was China’s growing assertiveness in diplomatic relations with the global leaders recently renewed market optimism. The same requires the White House to host a ‘Quad’ summit on September 24 with the leaders of India, Australia and Japan.
Even so, record US Producer Price Index (PPI) data and the early week comments from Philadelphia Federal Reserve Bank President Patrick Harker keep Fed tapering woes on the table and probe USD/CAD sellers ahead of today’s US inflation data. On the same line were the challenges for oil prices, like OPEC+ restoration of production cuts and Iran’s support to the nuclear deal.
Against this backdrop, the US Dollar Index (DXY) closed unchanged on Monday after refreshing the monthly top whereas the US 10-year Treasury yields 1.5 basis points to 1.32%. Further, the Wall Street benchmarked closed mixed but the S&P 500 Futures print mild gains by the press time.
Moving on, USD/CAD may witness sluggish moves as markets are likely to turn range-bound ahead of the crucial US CPI data. However, the oil prices move and the risk catalysts shouldn’t be ignored for the near-term direction.
Read: US Inflation Preview: CPI critical for taper, three scenarios for the dollar
Technical analysis
Although a lower-high bearish formation keeps USD/CAD sellers hopeful, a 100-day EMA level of 1.2520 becomes a tough nut to crack for the bears.