USD/CAD drops towards 1.3500 as Oil price recovers, focus on US PMI, Canada Retail Sales

• USD/CAD edges lower as markets prepare for top-tier data with slightly positive mood.
• Hopes of more stimulus from China, US-China ties join softer US Dollar to underpin Oil price recovery.
• Softer US Treasury bond yields also exert downside pressure on Greenback and Loonie pair.
• Mixed outcomes for scheduled statistics can keep traders on their toes ahead of Jackson Hole Symposium.

USD/CAD holds lower grounds near 1.3540 while portraying a sluggish weekly move heading into Wednesday’s European session.

The Loonie pair clings to mild losses amid a softer US Dollar and the recent improvement in Canada’s key export item WTI crude oil as markets await top-tier data from the US and Canada.

That said, the US Dollar Index (DXY) retreats from the 10-week high marked the previous day to around 103.50 at the latest while the WTI crude oil snaps a two-day losing streak by rising 0.20% intraday to $79.75 by the press time.

It’s worth noting that the market’s cautious optimism joins a pullback in the US Treasury bond yields to prod the Greenback buyers, as well as underpin the Oil price rebound.

Among the major catalysts contributing to the slightly positive mood are the headlines suggesting a likely improvement in the US–China ties, due to US Commerce Secretary Gina Raimondo’s visit to Beijing, scheduled for next week. On the same line are the early-week news suggesting the US removal of 27 Chinese entities from its Unverified List, lifting sanctions from those entities and flagging hopes of improving diplomatic ties.

Furthermore, mixed US data and Fed talks also prod the DXY bulls as market participants don’t expect the hawkish appearance of Fed Chair Jerome Powell at this week’s annual Jackson Hole event. That said, the US flashed slight improvement in the US Existing Home Sales for July and the Richmond Fed Manufacturing Index for August, which in turn should entertain the USD/CAD sellers. However, hawkish statements from Federal Reserve Bank of Richmond President Thomas Barkin put a floor under the pair.

Against this backdrop, the US 10-year Treasury bond yields keep the previous day’s retreat from the highest level since late 2007 to 4.31% whereas S&P500 Futures rise 0.25% intraday to regain 4,410 level after reversing from a one-week high the previous day.

Looking ahead, Canadian Retail Sales for June, expected to ease on MoM but likely flashing improving the positive Core details, may direct intraday traders of the USD/CAD pair ahead of the preliminary readings of the August month Purchasing Managers Indexes (PMIs) and Existing Home Sales for July for the US.

Technical analysis

Multiple pin bar candlesticks on the daily chart suggest the bullish exhaustion of the USD/CAD pair. However, the 10-DMA level of around 1.3510, quickly followed by the 1.3500 round figure, act as additional checks for the Loonie pair sellers before taking control.