USD/CAD slides towards 1.3050 as oil rebounds, DXY eases ahead of US/Canada data

• USD/CAD takes offers to refresh intraday low, extends pullback from a six-week high.
• Markets brace for US employment numbers, sluggish yields weigh on US dollar.
• China data favor oil buyers amid mixed supply-demand updates.
• Canada GDP, US ADP Employment Change appears important for the pair traders to watch for fresh impulse.

USD/CAD consolidates the latest gains while reversing from a 1.5-month high, refreshing intraday low near 1.3070 heading into Wednesday’s European session. In doing so, the Loonie pair takes clues from the softer prices of Canada’s main export item, i.e. WTI crude oil, as well as the US Dollar Index (DXY), as the pair traders await important statistics from Ottawa and Washington.

WTI crude oil prices consolidate the biggest daily fall in seven weeks by rising to $92.20 at the latest. The black gold seems to have benefited from the firmer China data and the market’s preparations for the US job numbers while ignoring mixed concerns over the US-Iran trade deal and Iraq’s supply concerns, not to forget Russia’s resistance to OPEC+ supply cut.

That said, China’s NBS Manufacturing PMI improved to 49.4 in August versus 49.2 expected and 49.0 prior whereas the Non-Manufacturing PMI also grew to 52.6 during the stated month compared to 52.2 market forecasts and 53.8 previous readings.

While portraying the mood, S&P 500 Futures refresh intraday high near 4,014, up 0.65% on a day by the press time. Also suggesting an absence of the risk-off mood is the steady US 10-year Treasury yields of around 3.11%, after rising to the two-month high the previous day.

It should be noted, however, that the fears emanating from hawkish Fedspeak and China’s covid conditions, as well as the Sino-American tension over Taiwan, seem to challenge the USD/CAD bears. On the same line could be the recently firmer Fed bets, as per the CME’s FedWatch Tool.

Looking forward, 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% in previous readouts.

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

Technical analysis

A daily closing beyond the 13-day-old ascending resistance line, near 1.3110 by the press time, appears necessary for the USD/CAD buyers to avoid visiting the 1.3000 psychological magnet.