USD/CAD retreats towards 1.3200 as Oil price edge higher, US Dollar softens amid pre-Fed anxiety

• USD/CAD reverses from the highest level in a week, snaps two-day winning streak despite lacking momentum.
• Oil price grinds higher even as IEA’s Birol suggests tighter markets in H2 2023, sentiment dwindles.
• US Dollar bulls take a breather ahead of July PMIs, FOMC and US Q2 GDP.
• Canada monthly GDP, other central banks also eyed for clear directions.

USD/CAD stays defensive around 1.3220 as it struggles to defend the weekly gains ahead of the top-tier data/events during early Monday. In doing so, the Loonie pair also hesitates in cheering a pullback in the US Dollar amid sluggish Oil prices.

That said, the US Dollar Index (DXY) renews its intraday low near 101.00 as it retreats from the highest level in eight days while portraying the market’s cautious mood. With this, the greenback’s gauge versus six major currencies prints the first daily loss in five, after reversing from the lowest levels since April 2022 in the last week.

On the other hand, WTI crude oil remains indecisive near $76.75, making rounds to the highest levels in three months as energy traders struggle to digest mixed comments from International Energy Agency (IEA) Executive Director Fatih Barol and United Arab Emirates (UAE) Energy Minister Suhail al-Mazrouei at the Group of 20 (G20) energy ministers’ meeting held in India.

Also read: WTI consolidates gains above $76.60 ahead of FOMC

It should be noted that the latest headlines suggesting more China-Taiwan tussles, which in turn result in Sino-US tension and weigh on the market sentiment, prod the USD/CAD bears amid a sluggish session.

In the last week, the US housing numbers and regional manufacturing indices were mostly downbeat but an improvement in the Retail Sales Control Group for June allowed the DXY to rebound from a 15-month low, as well as post the first weekly gain in three. Previously, the upbeat prints of the University of Michigan’s (UoM) Consumer Sentiment Index and consumer inflation expectations for July helped the greenback to challenge the bearish bias.  It’s worth noting, however, that the US Consumer Price Index (CPI) and Producer Price Index (PPI) for June joined the first below-expectations Nonfarm Payrolls (NFP) in 15 months to tease the Federal Reserve’s (Fed) policy pivot past July and drowned the US Dollar.

On the other hand, downside Canada inflation data also allowed the USD/CAD pair to print the weekly gain.

Moving on, the preliminary readings of the US S&P Global PMIs for July will direct intraday moves of the USD/CAD pair ahead of the key Federal Reserve (Fed) monetary policy meeting announcements. Also important to watch are the first readings of the US second-quarter (Q2) 2023 Gross Domestic Product (GDP) and the monthly Canadian GDP for May.

Technical analysis

A falling wedge chart pattern on the daily formation keeps the USD/CAD buyers hopeful unless the quote drops below the 1.3030 mark. That said, the bulls should wait for a clear upside break of 1.3255 for conviction.