Search ForexCrunch
  • USD/CAD extends recovery from 1.3333, prints third positive day in last four.
  • US dollar keeps the recent strength as risk-tone heavies, stimulus hopes strengthens.
  • WTI struggles to extend Monday’s gains despite blasts at the Iraq-Kuwait border.
  • Canadian Housing Starts, US PPI will populate the economic calendar.
  • USD/CAD picks up the bids near 1.3360 before Tokyo opens on Tuesday. The loonie pair recently gained traction as the US dollar rose on upbeat fundamentals while WTI finds it difficult to extend Monday’s recovery moves.

While the US dollar’s strength could be traced to American President Donald Trump’s latest executive orders, WTI paid a little heed to the recent blast in the Middle East amid fears of escalating US-China tension and the coronavirus (COVID-19) woes.

US President Trump’s sanction on the 11 Chinese diplomats, including Hong Kong leader Carry Liam, witnessed the same retaliation from Beijing. Following this, American leader Trump said phase one deal with China means “very little” to him. The update not only adds to the market’s risk-off mood but also weighs on the commodity demand and questions the energy buyers.

Further challenging the oil prices are pandemic worries. Although new cases from the US have stabilized off-late, Australia’s Victoria keeps refreshing the record death toll, 331 is the latest one, to portray the side-effects of the deadly virus. It’s worth mentioning that some of the Asian countries, like India, are still grappling with the first round and the wave 2.0 could provide a larger than anticipated economic loss, which in turn can weigh on the energy demand.

Other than the fundamental catalysts concerning Canada’s main export item crude oil, hopes of the US fiscal stimulus also have favored the pair’s latest upside. Following US President Trump’s executive orders to release unemployment claim benefits of $400, the opposition Democratic Party returns to the negotiation table. However, no clear dates for the COVID-19 relief package discussion are out yet.

Amid all these plays, risk-tone remains heavy with the S&P 500 Futures declining 0.10% to 3,350 after Wall Street marked mixed closing the previous day.

Looking forward, the pair traders will keep eyes on the Canadian Housing Starts for July, expected 210K versus 211.7K prior, coupled with the US Producer Price Index (PPI) that is likely receding to -0.7% from -0.8% earlier, for fresh direction. Additionally, the risk factors emanating from the Sino-American relations, US stimulus and virus news will also play their roles to determine near-term USD/CAD moves.

Technical analysis

A downward sloping trend line from July 14, at 1.3368 now, questions the pair’s immediate upside ahead of the monthly top surrounding 1.3450. On the downside, 1.3330 and 1.3300 can entertain sellers before diverting to the latest low around 1.3230.