USD/CAD rebound approaches 1.2900 amid hawkish Fedspeak, softer oil price

• USD/CAD grinds higher to pare the biggest daily loss in two weeks.
• Fed’s Kashkari favors hawkish bets despite softer US data.
• Oil prices retreat amid concerns surrounding OPEC+, Iran.
• Yields, stock futures retreat as traders await US Durable Goods Orders, Powell’s Jackson Hole speech.

USD/CAD consolidates the biggest daily slump in a fortnight as it seesaws near the daily top, up 0.20% around 1.2980 during early Wednesday morning in Europe. In doing so, the Loonie pair tracks the firmer US dollar, as well as the softer oil prices, amid a sluggish session ahead of the US Durable Goods Orders for July.

US Dollar Index (DXY) poked the multi-year high the previous day before reversing from 109.27, up 0.12% near 108.66 by the press time. That said, the fears of economic slowdown and the US Federal Reserve’s (Fed) aggressive rate hikes are the main factors that could have favored the DXY bulls even if the latest weakness in the US data triggered the quote’s pullback.

The preliminary readings of the US S&P Global Manufacturing PMI for August eased to 51.3 versus 52.0 expected and 52.2 prior while the Services gauge plunged to 44.1 from 47.3, compared to 49.2 market forecasts. According to S&P Global, the US economy is also in trouble as the Composite PMI shrank to 45, its lowest in 27 months. Furthermore, the US New Home Sales for July dropped to the lowest levels in six years, to 0.511M from 0.585M prior and 0.575M market forecasts. Furthermore, the US Richmond Fed Manufacturing Index for August dropped to -8.0 compared to the 0.0 previous reading.

Recently, Minneapolis Fed President Neel Kashkari mentioned that the biggest fear is that we are misreading underlying inflation dynamics, per Reuters. The policymaker also added that the Fed can relax on rate hikes when compelling evidence of CPI heading toward 2% is seen. Comments from Fed’s Kashkari tamed concerns that Fed Chair Powell would go slow on rate hikes while speaking at the Jackson Hole on Friday, as backed by Goldman Sachs.

Elsewhere, WTI crude oil drops 0.40% intraday to $93.30 at the latest, snapping a two-day uptrend near the fortnight high. In addition to the firmer US dollar, easing calls of the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, group’s production cuts appear the main catalyst for the black gold’s latest weakness. The energy bull’s retreat could also be linked to the impending return of Iran to the oil markets.

Amid these plays, US 10-year Treasury yields remain mostly steady around 3.05%, after rising to the highest in a month the previous day. That said, Wall Street benchmarks closed with mild gains and directed the S&P 500 Futures to follow the path by the press time, down 0.33% intraday.

Moving on, USD/CAD traders should pay attention to the US Durable Goods Orders for July, expected 0.6% versus 2.0% prior, for fresh impulse. However, major attention should be given to Friday’s speech by Fed Chairman Jerome Powell at the Kansas City Fed’s symposium in Jackson Hole.

Technical analysis

A two-week-old support line, near 1.2950, defends USD/CAD buyers trying to mark another battle with the key horizontal resistance area surrounding 1.3080.