- USD/CAD remains on the back foot around five-day low.
- US dollar pullback jostles with WTI weakness and risk reset ahead of the key data/events.
- US-China tension, mixed data outweigh hopes of virus cure.
- US Retail Sales, Canadian ADP Employment Change and ECB become the key data/events to follow.
USD/CAD bears attack 1.3500 ahead of the European session on Thursday. The loonie pair marked the heaviest loss in over a month after the previous day’s Bank of Canada (BOC) meeting while the recent weakness could be traced to the US dollar pullback. Even so, mild weakness in WTI and commodity currencies, due to the risk rest, seems to limit the quote’s losses.
Vaccine-led optimism fails to last long as the American policymakers prepare to levy harsh sanctions on Beijing’s diplomats. The news gains extra support as China stays ready to join the hand-to-hand combat, per the Global Times. Global markets earlier cheered increasing hopes that the coronavirus (COVID-19) vaccine will be out soon.
The shift in the risk-tone sentiment favored the US dollar index (DXY) to recover from the lowest in five weeks. The same seems to compress the WTI prices that flash 0.33% losses to $41.05 by the press time. Given the pullback in greenback, coupled with broad weakness in commodity-linked currencies, the pair refrains from extending the losses despite staying in the red zone.
While portraying the market mood, the US 10-year Treasury yields and the US stock futures print mild losses while Asia-Pacific shares snap the previous two-day gains as we write.
During the previous day, the pair slumped as the Bank of Canada’s (BOC) no rate change joined upbeat comments from the Governor Tiff Macklem in his first press conference as the Canadian central banker. Also helping the pair was the broadly risk-on mood and upbeat Canadian Manufacturing Sales.
For today, traders will be busy forecasting for the European Central Bank’s (ECB) monetary policy meeting, even if it is expected to hold the current policy unchanged. However, a downbeat forecast concerning the US Retail Sales and Philadelphia Fed Manufacturing Survey could keep the pair bears hopeful.
Technical analysis
With bearish MACD supporting the sellers on the 4-hour chart, a horizontal area from June 03, around 1.3490/80, gains the market attention. On the upside, 1.3540 and 1.3600 can entertain buyers in a case of the pair’s pullback while 200-bar EMA level of 1.3623 becomes a tough nut to crack for the bulls.
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