USD/CAD struggles below 1.3200 mark amid bullish Oil prices, sustained USD selling

• A combination of factors prompts fresh selling around USD/CAD on Thursday.
• Bullish Oil prices underpin the Loonie and exert pressure amid a weaker USD.
• Traders now look to the important US macro data for some meaningful impetus.

The USD/CAD pair extends the overnight pullback from the 1.3235-1.3240 area, or over a one-week high and continues losing ground through the Asian session on Thursday. The downward trajectory drags spot prices to a fresh daily low, around the 1.3165-1.3160 area in the last hour and is sponsored by a combination of factors.

Following the previous day's modest downtick, Crude Oil prices catch fresh bids and jump back closer to over a three-month high touched on Tuesday. The recently announced supply cuts by the world’s largest Oil producers - Saudi Arabia and Russia - and hopes that more stimulus from China to support its fragile economy will boost fuel demand act as a tailwind for the black liquid. This, in turn, is seen underpinning the commodity-linked Loonie, which, along with the prevalent US Dollar (USD) selling bias, exerts some downward pressure on the USD/CAD pair.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, drifts lower for the third successive day and retreats further from a two-week high touched on Tuesday. A general consensus that the Federal Reserve (Fed) is nearing the end of its rate-hiking cycle in the wake of a further moderation in inflation continues to weigh on the buck. Apart from this, the risk-on environment turns out to be another factor weighing on the safe-haven USD, which, in turn, is seen contributing to the offered tone surrounding the USD/CAD pair.

The USD bulls, meanwhile, seem rather unimpressed by the fact that the Fed left the door open for one more interest rate hike in September or November. It is worth mentioning that Fed Chair Jerome Powell, speaking to the post after the widely expected 25 bps lift-off on Wednesday, said that the economy still needs to slow and the labour market to weaken for inflation to credibly return to the 2% target. This, in turn, suggests that the path of least resistance for the USD is to the downside and supports prospects for a further intraday slide for the USD/CAD pair.

Market participants now look to the US economic docket - featuring the release of the Advance Q2 GDP report, Durable Goods Orders, the usual Weekly Initial Jobless Claims and Pending Home Sales. The data might drive the USD demand and provide some impetus to the USD/CAD pair later during the early North American session. Apart from this, Oil price dynamics should contribute to producing short-term opportunities.

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