USD/CAD bulls pausing as prices settle back on recent lows and support despite oil sell-off. Renewed optimism of a US economic recovery has given fuel to a downtrodden USD. Prospects of tapering from the BoC, are supportive of CAD. USD/CAD is currently trading at 1.3059 and quiet in mid-day New York session, held up at support in a sideways chop between a 1.3053 and 1.3095 range. The US dollar has been on the comeback and is some 0.5% higher in the DXY at the time of writing. The greenback’s bid was fuelled by yesterday’s ISM manufacturing beat shook out some weak hands betting against it following last week’s outline of a new approach at from the Federal Reserve’s Chairman, Jerome Powell. US manufacturing expanded in August at its fastest pace since late 2018, with the ISM’s manufacturing index rising to 65 from 54.2 in July. As for the Fed, the central bank intends to allow inflation to exceed the 2% target and for the unemployment rate to run low before seriously considering a rate hike. Based on the current Fed’s projections, inflation is not expected to reach the 2% objective before 2023, so this gave the green light to dollar bears who had been already jumping the gun on an amber light. The running consensus is, that unless market sentiment deteriorates markedly and risk aversion increases significantly, the dollar is likely to remain on the back foot. However, it is evident from yesterday’s reaction to the ISM number that data still matters which makes this week’s Nonfarm Payrolls event an important one. More on that below the ‘Key events ahead’. Domestic data had been received well Meanwhile, market participants have been getting rewarded for staying short USD/CAD, although bearish bets have been reduced in this recent spike. Domestic data had been received well. The second quarter Gross Domestic Produce was slightly better than feared at -38.7% While this was the largest pullback on record, but it was slightly better than projected in the July MPR (-43%), flash estimates from StatCan (-40%), or the market consensus (-39.4%). What was important here, the strong momentum into Q3 puts 2020 growth tracking well above the BoC’s forecast of -7.8%. Does it bring in the question as to whether the Bank will now start to think about removing stimulus any time soon? If the Canadian market could find itself contemplating tapering as soon as the first quarter, then such sentiment will bode strongly for the Canadian dollar, especially in a weak dollar rate environment. Crude oil prices support the CAD Another feature of the market has been crude oil. The nation’s natural resources economy is export-based which account for 45% of its total gross domestic product (GDP). The exportation of crude oil itself represents 10% of total Canadian exports and Canada is said to be a “net exporter” of crude oil. Therefore, crude oil pricing can influence Canada’s economy on a national level. The black gold had gained earlier this week as investors were buoyed by positive economic data and signs of a slower build up in OPEC output. Yesterday’s US ISM was accompanied by a private gauge of Chinese activity also growing strongly which helped to lift the price of oil as well. Additionally, OPEC monthly production rose by only half the amount permitted under the OPEC+ supply agreement. However, there was a potential late reaction to Russian Energy Minister Alexander Novak who said earlier today that they will propose that OPEC+ reacts to recovery in energy demand. Oil Price Analysis: WTI continues to be under pressure and breaks $42 per barrel The market had also priced in today’s news from yesterday’s API’s, so the combination may well have been just enough to trigger stops and shake out the weak speculators below $42.50 WTI which went on to print a daily low of $41.28. Key events ahead Besides this week’s US Nonfarm Payrolls event, Canada will also offer its own labour market data. Analysts at TD Securities expect that the recovery should lose some steam in August with 225k jobs created, down from the 680k averaged over June/July. The creation of 225k jobs, according to the analysts, should allow UE to drift lower to 10.2%. This reflects a pause in re-opening measures, although the continued improvement in mobility and benefits data point to another strong month for job growth. USD/CAD levels FX Street FX Street FXStreet is the leading independent portal dedicated to the Foreign Exchange (Forex) market. It was launched in 2000 and the portal has always been proud of their unyielding commitment to provide objective and unbiased information, to enable their users to take better and more confident decisions. View All Post By FX Street Expert score 5 Etoro - Best For Beginner & Experts0% Commission and No stamp DutyRegulated by US,UK & International StockCopy Successfull Traders 5 Read Review Open My Free Account Your capital is at risk. FXStreet News share Read Next Iraq’s oil ministry spokesman: Iraq’s conformity with oil cuts at above 100% in August FX Street 1 year USD/CAD bulls pausing as prices settle back on recent lows and support despite oil sell-off. Renewed optimism of a US economic recovery has given fuel to a downtrodden USD. Prospects of tapering from the BoC, are supportive of CAD. USD/CAD is currently trading at 1.3059 and quiet in mid-day New York session, held up at support in a sideways chop between a 1.3053 and 1.3095 range. The US dollar has been on the comeback and is some 0.5% higher in the DXY at the time of writing. 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