USD/CAD renews intraday low near 1.3400 as Wednesday’s Doji joins firmer Oil price ahead of US CPI

• USD/CAD takes offers to refresh intraday low, printing the biggest daily loss, so far, in more than a week.
• Oil price cheers cautious optimism, softer US Dollar and technical breakout to stay firmer around YTD top.
• US Dollar fails to justify trade war fears as markets brace for US CPI with eyes on Fed policy pivot.

USD/CAD justifies bearish technical signals while refreshing intraday low to around 1.3400 amid the early hours of Thursday morning in Europe. Apart from the technical details, mentioned below, the Loonie pair’s latest weakness could also be linked to the firmer price of Canada’s main export item WTI crude oil, as well as the US Dollar’s retreat.

US Dollar Index (DXY) remains depressed near 102.45 after snapping a two-day uptrend the previous day. In doing so, the Greenback’s gauge versus the six major currencies justifies the market’s cautious mood ahead of the US inflation data, namely the Consumer Price Index (CPI) for July. Additionally weighing on the DXY is the market’s cautious optimism.

It should be noted that the US-China trade war and looming Sino-UK tension fail to spoil the market’s mood as China policymakers show confidence in taming the economic fears.

That said, Financial Times (FT) came out with the news suggesting that UK Prime Minister Rishi Sunak is weighing whether to follow US President Joe Biden in restricting outbound investment into the Chinese tech sector, including artificial intelligence, chips and quantum computing. Before that, US President Joe Biden signed the much-awaited bill that allows the US Treasury Department to prohibit or restrict certain US investments in Chinese entities, per Reuters. In a reaction, China's Commerce Ministry cited “grave concerns” and marked the right to take measures against the US ban on technology investment. However, such an issue was long discussed and the announced steps are slightly lenient than originally planned, which in turn allowed the markets to remain cautiously optimistic.

Elsewhere, the firmer sentiment and likely improvement in demand from China join the looming supply crunch from Saudi Arabia and Russia to propel the WTI crude oil. Additionally, a clear upside break of an eight-month-old horizontal resistance, now immediate support around $83.50, as well as the softer DXY also allowed WTI to remain firmer around the yearly top, up 0.40% intraday near $84.05 by the press time.

Amid these plays, S&P500 Futures print mild gains despite Wall Street’s downbeat closing whereas the US Treasury bond yields also pare weekly losses.

Looking ahead, the early signals for the US inflation data and the downbeat prints of the US Nonfarm Payrolls (NFP) underpin the dovish Fed bias, which in turn seeks confirmation from today's US CPI.

Technical analysis

Wednesday’s Doji candlestick below the convergence of a five-month-old descending trend line and the 200-DMA, around 1.3450, directs the USD/CAD pair towards 1.3390-85 support area including July’s peak and the 100-DMA.