USD/CAD sellers approach 1.3000 as oil regains $91.00, DXY struggles at monthly peak

• USD/CAD renews intraday low as bulls take a breather at five-week high.
• WTI crude oil rises for the second consecutive day as USD pares recent gains, OPEC flashes mixed signals.
• US PMIs will be important but Powell’s speech at Jackson Hole Symposium is the key.
• Bulls can keep reins amid recession woes, hawkish Fed bets.

USD/CAD takes offers to renew intraday low near 1.3030 during early Tuesday morning in Europe. In doing so, the Loonie pair retreats from a monthly high to snap a five-day uptrend.

US Dollar Index (DXY) traces sluggish yields amid an inactive market session to consolidate recent gains. The greenback’s positioning could also be linked to the lack of major data/events, as well as the cautious mood ahead of today’s preliminary readings of the US PMIs for August and Friday’s speech from Fed Chair Jerome Powell at the annual Jackson Hole Symposium.

It’s worth noting that an increase in prices of Canada’s main export item, namely WTI crude oil also favors the USD/CAD sellers. That said, the black gold prices print 0.40% intraday gains around $91.00 during the two-day uptrend. The commodity’s latest gains could be linked to the hopes of more demand from China, amid expectations of more stimulus, as well as mixed comments from the global producers.

Bloomberg quotes Saudi Arabian Energy Minister Prince Abdulaziz bin Salman as saying, “the OPEC and its allies (OPEC+) may be compelled to reduce oil production, as the physical and futures markets get increasingly strayed away from fundamentals.”

Elsewhere, the US 10-year Treasury yields retreat from the monthly high of 3.04%, down nearly two basis points (bps) to 3.02% by the press time. The pullback in the benchmark US bond coupons could be linked to the absence of major catalysts, as well as mixed chatters surrounding the People’s Bank of China (PBOC). Recently, China's Securities Times reported that the PBOC may reduce RRR this year to compensate for medium-term lending facility (MLF) maturity. The article states that reserve requirement ratio (RRR) cuts may lower lending prime rates. It is with noting that this is a state-run agency reporting such opinions.

Amid these plays, the S&P 500 Futures print mild gains even as Wall Street closed in the red.

It should be noted, however, that the fears of global recession, powered by Europe and China, join hawkish Fed bets to keep the USD/CAD buyers hopeful. “Fed funds futures on Monday have priced in a 54.5% chance of a 50 basis-point (bp) rate hike at the Fed's policy meeting next month. The fed funds rate is seen hitting roughly 3.6% by the end of the year, with a peak rate of nearly 3.8% in March 2023,” mentioned Reuters following the latest Chicago Fed National Activity Index that improved to 0.27 in July, from a downwardly revised -0.25 prior.

Technical analysis

A sustained daily closing below the 50-DMA support near 1.2915 could allow USD/CAD bears to aim for the monthly low surrounding 1.2725. Until then, the Loonie pair remains capable of approaching an eight-month-old resistance line, near 1.3120 by the press time.