USD/CAD steadies near 1.3000 amid sluggish oil prices, cautious mood ahead of US CPI

• USD/CAD bears take a breather at two-week low, after four-day downtrend.
• Oil prices remain sluggish amid mixed concerns over the demand-supply matrix.
• Softer inflation expectations, retreating yields and a light calendar ahead of US CPI test moves.

USD/CAD portrays inaction amid the market’s anxiety ahead of the US inflation data during early Tuesday morning in Europe. In doing so, the Loonie pair traces the sluggish oil prices, Canada’s main export, as well as mixed risk catalysts, while taking rounds to 1.2985 at the latest. It’s worth noting that the Loonie pair dropped during the last four days before recently trading sideways near the lowest levels in 12 days.

WTI crude oil remains sidelined at around $87.30, after refreshing the weekly high, amid mixed concerns over the supply and demand of the black gold, mainly backed by the news from the US Energy Information Administration (EIA) and the Department of Energy (DOE). In doing so, the quote snaps a three-day uptrend.

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Market sentiment remains sluggish as hopes of softer inflation data from the US jostles with the hawkish Fedspeak and a light calendar, not to forget the recession woes. Also challenging the momentum traders is the blackout for the Fed policymakers ahead of the next week’s Federal Open Market Committee (FOMC).

That said, US Consumers saw inflation at 5.75% over the next 12 months in August, down from July’s 6.2%, as well as the lowest since October 2021, as per the New York Fed's monthly consumer expectations survey details released on Monday.  Further data shared by Reuters suggest that the three-year inflation expectations marked the slowest pace since late 2020 while averaging 2.8% versus 3.2% reported in July.

On Monday, updates that Ukraine is gaining success in pushing back the Russian military from some of its areas seem to have underpinned the market’s cautious optimism, even as the same raised the fears of Russia’s harsh retaliation, which in turn favored USD/CAD bears. On the same line could be the hopes of more stimulus from major economies like China, the US, the UK and Europe. Furthermore, the latest news from the Wall Street Journal (WSJ) suggesting that the US gas prices are down for the 13^th consecutive week also eased the market’s pressure and favored the risk-on mood, as well as the pair bears.

Elsewhere, Bloomberg’s news that China’s Premier Li Keqiang vowed more policy support to drive up consumption in the economy seemed to have underpinned sentiment of late. The news also signaled that China will adhere to multiple measures to stabilize growth, employment and prices.

Moving on, the US Consumer Price Index (CPI) data for August, expected to ease to -0.1% MoM versus 0.0% prior, will be important for the pair traders. Should the inflation numbers print softer data, the USD/CAD pair may witness further downside.

Also read: US CPI Preview: Dollar set to climb on low core expectations, three scenarios

Technical analysis

Although 50-day EMA restricts the immediate downside of the USD/CAD pair to around 1.2965, buyers will remain away unless witnessing a clear upside break of the previous support line from August 11, at 1.3095 by the press time.