USD/CAD buyers attack 1.2900 despite firmer oil prices, Canada Retail sales, US PMI eyed

• USD/CAD takes the bids to refresh intraday high, pares the first weekly loss in four.
• Oil prices ignore US dollar’s rebound, Nord Stream 1 resumption.
• Mixed Canada economics, ECB-inspired weakness of USD favored bears earlier.
• US PMIs, Canada Retail Sales will be important to watch for clear directions.

USD/CAD picks up bids to refresh intraday high near 1.2895 during Friday’s Asian session. In doing so, the Loonie pair justifies a firmer US dollar, ignoring firmer prices of Canada’s key export item WTI crude oil, during a sluggish session.

The latest weakness in the market’s sentiment emanates from the recheck of the optimism following the ECB’s verdict, as well as the pre-established fears of recession and covid. Also underpinning the US dollar’s safe-haven demand is the next week’s Federal Open Market Committee (FOMC). It’s worth noting that the absence of major data/events and cautious mood ahead of flash readings of the US S&P Global PMIs for July and Canada’s Retail Sales for May also propel the USD/CAD prices.

While portraying the mood, the US Dollar Index (DXY) picks up bids to refresh its intraday high around 106.70, up 0.12% on a day, as risk-aversion returns to the table. That said, Wall Street benchmarks closed firmer and the US Treasury 10-year Treasury yields marked the biggest daily slump in five weeks. That said, S&P 500 Futures drops 0.45% by the press time.

It’s worth noting that a slump in the US Treasury yields due to the European Central Bank’s (ECB) higher-than-expected 50 basis points (bps) rate hike drowned the US dollar the previous day. On the same line was the announcement of a new tool called the Transmission Protection Instrument (TPI) to tame disorderly market dynamics in the bloc.

However, the oil prices failed to cheer the risk-on mood and the softer US dollar the previous day on the resumption of gas flows from Russia’s Nord Stream 1 pipeline. WTI crude oil currently trades near $96.20 as it consolidates the biggest daily slump in eight days.

Moving on, the US S&P Global Manufacturing PMI is expected to decline to 52.0 from 52.7 whereas its Services counterpart could ease to 52.6 from 52.7. With this, the Composite PMI may drop to 51.7 from 52.3 prior. Considering the downbeat forecasts for the US data, the US dollar may witness further headwinds and the same could help the USD/CAD bears if the Canada Retail Sales match 1.6% MoM forecasts for May, versus 0.9% prior.

Technical analysis

Unless breaking an upward sloping support line from June 28, at 1.2850 by the press time, USD/CAD can aim for the 200-SMA and the monthly horizontal resistance, respectively near 1.2915 and 1.2940.