USD/CAD retreats from 11-week high towards 1.3500 on downbeat US Dollar, firmer Oil price

• USD/CAD reverses from multi-day high amid sluggish markets, prints the first intraday loss in five.
• Hopes of more stimulus from China, pullback in yields contrasts with debt woes to prod market sentiment.
• US Dollar, Oil price cling to mild losses amid cautious mood ahead of next week’s Jackson Hole Symposium.

USD/CAD languishes at the highest level since June 01, recently easing from the multi-day top, as market players seek more clues to defend the five-day uptrend heading into Friday’s European session. In doing so, the Loonie pair justifies recently firmer prices of the WTI crude oil, Canada’s key export item, as well as benefits from the US Dollar’s retreat.

US Dollar Index (DXY) clings to mild losses near 103.30 as it prints the second loss-making day after refreshing the two-month high the previous day. The Greenback’s latest weakness could be linked to the softer Treasury bond yields. It should be noted that the US 10-year Treasury bond yields dropped by around five basis points (bps) in the last hour to 4.25% as market players brace for the next week’s central bankers’ speeches at the Jackson Hole Symposium amid a light calendar.

On the other hand, WTI crude oil stays firmer for the second consecutive day while rising half a percent to $80.00 by the press time. Even so, the black gold eyes the first weekly loss in eight amid fears emanating from China. That said, the energy benchmark’s latest gains could be linked to hopes of more stimulus to tame the debt woes after China’s Evergrande filed for bankruptcy proceedings in the US.

Even so, the downbeat prints of the second-tier investment and employment statistics from Canada contrast with the upbeat US activity numbers, Retail Sales and wage growth to keep the USD/CAD buyers hopeful. Elsewhere the latest Fed Minutes showed that most policymakers preferred supporting the battle again the ‘sticky’ inflation, despite being divided on the imminent rate hike, which in turn challenges the market’s previous policy pivot concerns about the US central bank and favors the hopes of the Loonie pair.

Amid these plays, stock futures in the US and Europe stay defensive at the weekly lows.

Moving on, Canada Industrial Production and Raw Material Prices for July will decorate the calendar and provide fresh impetus to the USD/CAD pair. However, major attention will be given to the next week’s central bankers’ comments and preliminary PMIs for August.

Technical analysis

USD/CAD pairs’ sustained trading below a three-week-old rising support line, near 1.3520 at the latest, precedes a clear upside break of a five-month-old previous resistance line, close to 1.3450 by the press time, to challenge the bears, especially amid the overbought RSI.