USD/CAD seesaws around 1.3500 despite firmer Oil price ahead of US PMIs

• USD/CAD treads water after sluggish start of the week.
• Canada holiday, mixed feeling in the markets and Oil’s rebound together portrayed Loonie pair’s inaction.
• US President Biden, House Speaker McCarthy appear optimistic on debt ceiling talks.
• Preliminary US S&P Global PMIs for May, second-tier Canada data and return of full markets to offer active trading day.

USD/CAD remains sidelined around 1.3500, after two consecutive days of inaction, as traders brace for a busy Tuesday amid early hours of Asian session. In doing so, the Loonie pair fails to justify the recently firmer prices of WTI crude oil, Canada’s key export, as firmer US Dollar and yields play their roles. If we trace the reason behind the pair’s dull performance on Monday, the Canadian Bank Holiday could be held responsible.

That said, the hopes of no United States default and hawkish Federal Reserve (Fed) expectations seemed to have recently underpinned the US Dollar. However, the Oil price appears to cheer China’s readiness for more investment and likely supply-crunch due to the geopolitical tension surrounding the US, Russia and China.

Recently, US President Joe Biden said that he believed they will make some progress on the debt ceiling talks while House Speaker Kevin McCarthy said, “We both believe we need to change the trajectory.”

On the other hand, Minneapolis Federal Reserve President Neel Kashkari favored the rate hike trajectory while citing the fears of the US default and banking crisis, which in turn allowed the US Dollar to remain firmer. On the same line, St. Louis Federal Reserve President James Bullard ruled out the recession concerns on Monday while saying that He sees two more rate hikes this year before reaching the base rate. Furthermore, Atlanta Fed President Raphael Bostic, Richmond Fed President Thomas Barkin and San Francisco President Mary C Daly recently backed the calls for higher rates.

Elsewhere, US Official recently mentioned that they’re working directly with China on the Micron issue. Beijing banned chips from US manufacturer Micron, after terming them a security threat, which in turn gave rise to a situation where Washington and Beijing exchanged harsh words. Additionally, the China Securities Journal (CSJ) cited the dragon nation’s sturdy economic transition while the People’s Bank of China (PBoC) defends its status quo, which in turn favors commodity prices, including WTI, due to China’s dominance as the world’s biggest industrial player.

With this, the US Dollar Index (DXY) regained upside momentum on Monday after a downbeat close at the end of the two-week winning streak by Friday, inactive of late. With this, the greenback’s gauge versus the six major currencies ended the day around 103.23, making rounds to the same level by the press time.

It should be noted that WTI Crude Oil began the week on a negative note before bouncing off $70.65 to end the day on a positive side around $72.15.

Amid these plays, Wall Street ended the day mixed but the US Treasury bond yields remained firmer. That said, the US 10-year and two-year Treasury bond yields remain indecisive around the highest levels in 10 weeks after rising for the last seven consecutive days, around 3.72% and 4.32% at the latest.

Looking ahead, the US S&P Global PMIs for May and Canadian Industrial Production for April may entertain the USD/CAD traders as the full markets return.

Technical analysis

USD/CAD portrayed back-to-back Doji candlesticks in the last two days while staying within a one-month-old symmetrical triangle, currently between 1.3515 and 1.3475.