USD/CAD traces oil’s struggle around six-week top near 1.3100, US ADP, Canada GDP in focus

• USD/CAD retreats from a multi-day high, sidelined of late.
• Oil prices struggle to justify talks of the US-Iran deal on OPEC+ hints from Russia.
• Risk-off mood, hawkish Fedspeak underpin bullish bias ahead of the key US/Canada data.

USD/CAD grinds higher around 1.3090 during Wednesday’s Asian session as traders jostle with the US dollar’s strength amid sour sentiment and hawkish Fed bets, as well as mixed moves in oil prices, Canada’s main export item.

That said, WTI crude oil prices remain pressured around $92.00, after declining the most in seven weeks the previous day. The black gold’s downside could be linked to the statements from Iraq's State Organization for Marketing of Oil (SOMO) said on Tuesday that their delegation plans to travel to Germany for oil export talks. “Iraq ready to boost oil exports to Europe, if asked,” adds Iraq’s SOMO.

On the same line could be the headlines from OPEC and its allies, the group known as OPEC+, which stated, per the Russian news TASS, “Potential OPEC+ output cuts not under discussion now.” Also weighing on the black gold prices were expectations that Iran may release more oil.

Elsewhere, chatters surrounding the US-Iran oil deal appeared to have battled the oil bears.

It should be noted that the firmer US data and hawkish Fedspeak should have ideally fuelled the USD/CAD prices. That said, the US Consumer Confidence for August improved to 103.2 versus 95.3 in July, per the Conference Board’s (CB) latest survey details. Also, US Housing Price Index (HPI) rose by 0.1% MoM in June compared to May's increase of 1.3% and market expectation of 1.1%. Further, the S&P/Case-Shiller Home Price Indices eased to 18.6% YoY during the stated month versus 19.5% forecast and 20.5% previous readings. It should be noted that the US JOLTS Job Openings grew to 11.239M in July versus 10.475M expected and 11.04M prior (revised from 10.698M).

Following the data, Richmond Federal Reserve Bank President Thomas Barkin said, "I don't expect inflation to come down predictably." On the same line was Atlanta Fed President Raphael Bostic who said, “Slowing inflation data 'may give us reason' to slow interest rate hikes.” Recently, New York Fed President John Williams said, per the WSJ, “We are not at restrictive policy yet.” The policymaker also added, “We need to get interest rates higher than longer run a neutral level.”

Also, fears of the Sino-American war escalated as Taiwan fired the first warning shots at Chinese drones, which in turn favored the USD/CAD buyers. On the same line was the Wall Street Journal’s news stating that the US Army grounds entire fleet of Boeing-made Chinook helicopters.

While portraying the mood, the US 10-year Treasury yields rose to the highest levels in two months and Wall Street closed in the red while the US dollar regained upside momentum.

Moving on, the US ADP Employment Change for August, the early signal for Friday’s US Nonfarm Payrolls (NFP), expected 200K versus 128K prior, will be important to watch for fresh impulse. Also crucial will be Canada’s Gross Domestic Product (GDP) for the second quarter (Q2), expected 4.5% annualized versus 3.1% prior. Additionally, the monthly Canadian GDP is expected to grow 0.1% versus 0.0% previous readouts. Furthermore, China’s NBS Manufacturing PMI for August, expected 49.2 versus 49.0 prior, might offer immediate directions to the pair.

Also read: ADP Jobs Preview: Three reasons to expect the data to drive the dollar higher

Technical analysis

USD/CAD remains vulnerable to declining towards the 1.3000 psychological magnet unless providing a daily closing beyond the 13-day-old ascending resistance line, near 1.3110 by the press time.