USD/CAD pares intraday losses near 1.3500 amid upbeat USD, pullback in Oil price

• USD/CAD picks up bids to recover from intraday low, remains sluggish for third consecutive day.
• Oil price retreat recently weighs on Loonie pair even as US Dollar grinds higher.
• May’s monthly PMIs for US, Oil inventory data eyed for clear directions.

USD/CAD recovers from the intraday low of 1.3485 as US Dollar rebound joins downbeat Oil prices early Tuesday in Europe. That said, the Loonie pair remains indecisive around 1.3500 by the press time.

US Dollar Index (DXY) grinds higher around 103.30 during the two-day uptrend by the press time. With this, the USD/CAD pair bears the burden of the firmer US Dollar amid hopes of avoiding the US default, despite US President Joe Biden and House Speaker Kevin McCarthy’s failure to offer a deal to avoid the debt ceiling expiry during the latest negotiations.

Apart from the US debt ceiling concerns, the recent run-up in the odds favoring the Federal Reserve’s (Fed) 0.25% rate hike in June, as well as no rate cuts in 2023, versus the Bank of Canada’s (BoC) dovish hike, also keeps the USD/CAD bulls hopeful.

On the other hand, the WTI crude oil price retreats to $72.00, reversing the week-start gains amid a firmer US Dollar and expectations that the geopolitical tensions surrounding Russia and China, coupled with the hawkish central bank's expectations may weigh on the economic transition and the energy demand. It should be noted, however, that the black gold’s weakness appears limited amid the International Energy Agency’s (IEA) expectations suggesting a fall in the Oil supplies by almost 2 million barrels per day (bpd) in the second half (H2) of the year.

While portraying the mood, S&P500 Futures remain mildly bid near 4,210, up for the second consecutive day as it reverses Friday’s pullback from a nine-month high. With the upbeat US stock Futures, as well as the mildly positive performance of Wall Street, the benchmark 10-year and two-year US Treasury bond yields pause a five-day uptrend at the highest levels in two months.

Looking forward, 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. Also important to watch will be the weekly Oil inventories and updates surrounding the US debt ceiling.

Technical analysis

Back-to-back Doji candlesticks on the daily chart of the USD/CAD join steady RSI (14) to portray the latest indecision among the Loonie pair traders.