USD/CAD rebound firmly to near 1.3450 as USD Index continues to defend further downside

• USD/CAD has shown a decent rebound to near 1.3450 supported by firmer US Yields.
• S&P500 futures have surrendered nominal gains, portraying further depletion of risk appetite.
• Weaker-than-anticipated US Employment data would put more pressure on the USD Index.

The USD/CAD pair has shown a recovery move to near 1.3450 after getting faith from a minor recovery in the US Dollar index (DXY). The Loonie asset is looking to recapture Tuesday’s high at 1.3465 as US Treasury yields remained firm despite rising odds of a steady monetary policy announcement by the Federal Reserve (Fed) for its May meeting.

US government bonds have failed to attract demand despite the street anticipating an unchanged interest rate decision by the Fed ahead. The 10-year US Treasury yields have climbed above 3.35%. Also, S&P500 futures have surrendered nominal gains added in the Asian session and have resumed their downside move, portraying further depletion of risk appetite among market participants.

The USD Index has rebounded marginally to near 101.60 after printing a fresh monthly low at 101.45. The downside bias for the USD Index has not faded yet, however, growing anxiety among market participants ahead of United States Employment data is providing a short-term cushion to the US Dollar.

After a decline in Job Openings and Manufacturing PMI data, it would be fine considering a cooldown in the US labor market. Demand for labor has remained extremely solid, however, rising rates are putting a burden on firms as they are facing problems in dealing with issues of higher interest obligations and tight credit conditions by the US banks.

Considering estimates, the US economy has added 200K jobs in March vs. 242K jobs added in February. Weaker-than-anticipated additions of labor would add more pressure on the USD Index ahead.

On the oil front, oil prices are aiming to sustain comfortably above $81.00 in the Asian session. Volatility in the oil price is anticipated ahead of the release of the weekly oil inventory data by the US Energy Information Administration (EIA) for the week ending March 31. It is worth noting that Canada is the leading exporter of oil to the US and higher oil prices would strengthen the Canadian Dollar.