- USD/CAD picks up bids to reverse early Asian session losses around weekly top.
- Market’s anxiety joins hawkish Fed bets to underpin US dollar strength.
- Due to recession fears, oil prices fail to justify supply crunch fears and IEA’s upbeat demand forecasts.
USD/CAD prints a three-day uptrend as it approaches the 1.3200 threshold, around 1.3170 during early Thursday morning in Europe. In doing so, the Loonie pair picks up bids to reverse the early Asian session losses while approaching the key resistance line.
The US dollar’s rebound and the downbeat prices of Canada’s main export item, WTI crude oil, could be linked to the quote’s latest strength. However, the market’s lack of interest ahead of the key US Retail Sales seemed to test the bullish moves.
That said, the US Dollar Index (DXY) reverses the previous day’s downbeat performance around 109.70 even as the US Producer Price Index (PPI) flashed softer readings in August. US PPI declined to 8.7% YoY in August from 9.8% in July, versus 8.8% market forecasts. Details suggest that the PPI ex Food & Energy, better known as Core PPI, also eased to 7.3% YoY from 7.6% but surpassed the market expectation of 7.1%.
Even so, the 75% chance of the Fed’s 75 basis points (bps) rate hike in the next week and the 25% odds favoring the full 100 bps Fed rate lift, as per the CME’s FedWatch Tool, favor the DXY bulls.
On the same line could be US President Joe Biden’s rejection of US fears and China’s stimulus are some of the key developments that should have favored the risk appetite. However, the Sino-American tussles and the European energy crisis seemed to have challenged the optimism. It’s worth noting that the looming labor strike in the US appears to be an extra burden on the risk appetite.
It should be noted that the WTI crude oil prices remain pressured at around $88.00 despite fears of a supply crunch in the US and upbeat demand forecasts from the International Energy Agency (IEA). The reason could be the recession fears and higher inventory data from the Energy Information Administration (EIA).
Also read: US Retail Sales Preview: Can consumers keep up with inflation? A breather could weigh on the dollar
Amid these plays, the S&P 500 Futures print mild gains around 3,670 whereas the US 10-year Treasury yields remain directionless near 3.416%.
Moving on, a light calendar at home and sluggish prices of WTI crude oil highlight the US Retail Sales for August, expected to remain unchanged at 0.0%, as the primary catalyst of the day. Should the data arrive as strong, the USD/CAD prices may pierce the key 1.3210 hurdle.
Technical analysis
A two-month-old resistance line, around 1.3210 by the press time, appears to be the key hurdle for the USD/CAD bulls to cross during further advances. Meanwhile, the pair buyers remain hopeful until staying beyond the 50-SMA on the four-hour chart and the 61.8% Fibonacci retracement level of the pair’s July-August downside, respectively near 1.3100 and 1.3030 in that order.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD treads water just above 1.0400 post-US data
Another sign of the good health of the US economy came in response to firm flash US Manufacturing and Services PMIs, which in turn reinforced further the already strong performance of the US Dollar, relegating EUR/USD to the 1.0400 neighbourhood on Friday.
GBP/USD remains depressed near 1.2520 on stronger Dollar
Poor results from the UK docket kept the British pound on the back foot on Thursday, hovering around the low-1.2500s in a context of generalized weakness in the risk-linked galaxy vs. another outstanding day in the Greenback.
Gold keeps the bid bias unchanged near $2,700
Persistent safe haven demand continues to prop up the march north in Gold prices so far on Friday, hitting new two-week tops past the key $2,700 mark per troy ounce despite extra strength in the Greenback and mixed US yields.
Geopolitics back on the radar
Rising tensions between Russia and Ukraine caused renewed unease in the markets this week. Putin signed an amendment to Russian nuclear doctrine, which allows Russia to use nuclear weapons for retaliating against strikes carried out with conventional weapons.
Eurozone PMI sounds the alarm about growth once more
The composite PMI dropped from 50 to 48.1, once more stressing growth concerns for the eurozone. Hard data has actually come in better than expected recently – so ahead of the December meeting, the ECB has to figure out whether this is the PMI crying wolf or whether it should take this signal seriously. We think it’s the latter.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.