USD/CAD grinds higher towards 1.2400 amid softer oil, mixed clues

• USD/CAD seesaws within 30-pip immediate trading range after first monthly negative in five.
• Market sentiment dwindles amid firmer inflation fears head of the Fed, downbeat China data also challenge commodities, Antipodeans.
• US/Canada PMIs can entertain traders, risk catalysts are important too.

USD/CAD struggles to extend Friday’s recovery moves, edges higher around 1.2380 amid Monday’s Asian session. Alike all majors, the Loonie pair also had to respect the broad US dollar gains the previous day but a lack of major greenback positives afterward challenge the quote’s latest moves. Even so, the pair bears refrain from entry amid downbeat prices of oil, Canada’s biggest export item.

Steady prints of the Fed’s preferred inflation gauge joined optimism concerning the US stimulus to propel the US Dollar Index (DXY) the most since mid-June on Friday. That said, the US Core PCE Inflation data remained firmer around 3.6%, versus a 3.7% market forecast, for September. The same bolstered traders’ fears over the US inflation and Fed tapering chatters, as could also be sensed in the latest speech from Fed Chairman Jerome Powell, on October 22, where he dumped ‘transitory’ concern for inflation.

It should be noted that a softer-than-expected monthly Canadian GDP for September, 0.4% versus 0.7% market consensus, joined the heaviest jump in the US Employment Cost Index since 2001 to propel the USD/CAD prices the previous day.

Also, escalating fears that China’s economy is losing momentum weigh on the oil prices and keep the Loonie pair buyers hopeful. On the same side were recently escalating US-China tussles, the latest update being the US-EU accord to solve steel and aluminum issues and indirectly battle China.

Amid these plays, S&P 500 Futures print 0.30% intraday gains, majorly on increasing hopes of US stimulus, whereas the US 10-year Treasury yields rise two basis points (bps) to 1.575% by the press time. Further, the WTI crude oil prices drop 0.50% intraday, near $82.10 at the latest, to favor the USD/CAD bulls.

Looking forward, October’s monthly Markit PMI for Canada and the US ISM Manufacturing PMI may entertain USD/CAD traders but major attention will be given to US infrastructure deal headlines and China news for fresh impulse.

Technical analysis

USD/CAD recovery remains less legitimate until the quote stays below July’s low surrounding 1.2425. Alternatively, 61.8% Fibonacci retracement of June-August upside, near 1.2365, can entertain short-term sellers ahead of directing them to the last month’s bottom surrounding 1.2290.