USD/CAD probes bulls around 1.2400 in search of fresh clues
- USD/CAD seesaws around weekly top after two-day uptrend.
- Risk appetite dwindles ahead of the day’s key data.
- Covid, Fedspeak keep US dollar strong, WTI fails to back the CAD bulls.
- China PMI, US ADP and Canadian GDP to decorate the calendar, qualitative headlines become the key.
USD/CAD eases to 1.2396, following a two-day rally to the weekly high, amid a quiet Asian session on Wednesday. The Loonie pair’s latest gains could be linked to the broad US dollar gains, backed by covid fears and upbeat US data. However, a lack of major data/events seems to underpin the latest pullback.
The coronavirus (COVID-19) Delta variant becomes the key concern for global markets of late and puts a safe-haven bid under the US dollar. Also favoring the greenback bulls were the mixed comments from the US Federal Reserve (Fed) policymakers and strong data relating to consumer sentiment and housing.
The covid strain seems to have badly hit Australia, Thailand and Indonesia in recent days and the fact that these nations also lag in jabbing propel the rush to risk safety. On the other hand, Fedspeak fails to defend the easy money policies amid upbeat statistics. That said, the latest comments from Fed Governor Christopher Waller could be cited as supportive to the tapering even if rejecting near-term rate hikes and portraying a long way to employment recovery.
It’s worth noting that OPEC+ headlines ahead of Thursday’s meeting also back the WTI prices, the key export item for Canada, but failed to pull the USD/CAD back from one week as the greenback strength lures traders.
Amid these plays, S&P 500 Futures print mild gains after Wall Street benchmarks’ indecisive closings. Further, the US 10-year Treasury yield remains lackluster around 1.47% by the press time.
Moving on, China’s NBS Manufacturing PMI for June, expected 51 versus 50.8, may offer immediate direction to USD/CAD but the risk appetite-related headlines become more important. Following that, Canada’s monthly GDP for April, expected -0.8% versus +1.0% prior, as well as US ADP Employment Change for June, forecast 600K against 978K previous readouts, will be important to watch for fresh impulse.
Technical analysis
A daily closing beyond the 100-day SMA level of 1.2400 becomes necessary for USD/CAD bulls to aim for the five-month-old resistance line close to 1.2465. Otherwise, pullback moves toward the 1.2270 horizontal support, stretched from late April, can’t be ruled out.