USD/CAD bulls struggle below 1.2900 as oil defends $103 on USD pullback ahead of PMI

• USD/CAD retreats from intraday high, battles the key resistance line from December 2021.
• WTI crude oil bounces off daily low as DXY pares gains amid mixed sentiment.
• US, Canadian PMIs for April may offer short-term directions but Wednesday’s FOMC is the key catalyst.

USD/CAD consolidates intraday gains around 1.2855 as European traders take over from their Asian friends on Monday.

The Loonie pair’s latest pullback takes clues from the US dollar’s failures to stay strong at the 20-year high as traders brace for Wednesday’s Federal Open Market Committee (FOMC).

The greenback’s consolidation helps oil prices to recover losses made in Asia. That said, WTI crude oil prices pick up bids to 103.35, down 0.10% by the press time. Fears of Russia’s full-blown attack on Mariupol and the European oil embargo also favor the oil prices of late even as China’s covid woes test energy bulls.

The US Dollar Index (DXY) retreat diverts from the firmer US Treasury yields as the 10-year benchmark rises 5.7 basis points (bps) to 2.942% at the latest. However, the risk profile remains weak as Eurostoxx 50 and DAX print losses at the latest, following Friday’s Wall Street moves and Asian session pessimism.

Looking forward, the pre-Fed woes may exert downside pressure on the greenback, which in turn can help the USD/CAD bears. Though, today’s the US and Canadian PMIs for April can offer intermediate directions.

That being said, Canada’s S&P Global Manufacturing PMI may ease from 58.9 to 57.9 whereas US ISM Manufacturing PMI might improve to 58.0 versus 57.1 prior. In that case, the USD/CAD north-run remains intact, unless oil prices refrain from rising further and the risk appetite remains weak.

Technical analysis

A daily closing beyond the five-month-old descending trend line, around 1.2860 by the press time, becomes necessary for the bulls to aim for March’s high of 1.2909.