USD/CAD supported on elevated oil prices against otherwise fluid variables, including USD

• USD/CAD sinks to fresh daily lows as the DXY can’t maintain a bid and oil prices remain elevated.
• The CAD could be the cleanest of a basket of dirty commodity currencies in the face of trade war escalations. 

USD/CAD is currently trading at 1.3157 and trading between 1.3152 and 1.3231, losing some 0.42% on the day so far. 

While it is true that the CAD is retaining good momentum, supported by oil prices in the high end of the $42 area, the greenback is playing a major role in the upside of both commodities and G10-FX.

It is all eyes on the US dollar 

The greenback can’t catch a meaningful bid for very long. 

The week did not start well for the greenback following the weaker than expected Empire manufacturing report.

In this regard, the Philly Fed survey will be closely watched later in the week for further evidence of a worsening manufacturing environment.

Meanwhile, the 20y auction, following last week’s surprisingly under-subscribed 30-year auction which lifted yields and supported the dollar will also be eyed. 

The Federal Open Market Committee will also be in focus as the market attempts to gauge the demand for the duration and the Federal Reserve’s willingness to term out QE purchases. 

CAD dynamics in a fluid global pandemic 

As for the dynamic of the Canadian dollar, CAD net short positions built on the previous week’s surge and are at their highest level since June. 

This dynamic could continue so long as the oil market can remain resilient in a highly fluid global pandemic and among trade war narratives that could weigh heavily on the demand side. 

In the same vein, the Canadian dollar could well outperform in the commodity-fx complex should trade war themes gather traction.

Such an event would weigh on the commodity complex and currencies where AUD travelled to arguably overvalued territories.

Meanwhile, as for data, albeit playing second fiddle to the broader themes, considering that numbers are a little outdated, traders might wish to tune in to the Consumer Price Index, set to have slowed to 0.5% in July according to consensus.

Then, we have Retail Sales. Analysts at TD Securities explained that these should rise by 19% in June, below flash estimates for a 24.5% advance. ”Look for auto sales to lead the increase, leaving ex-autos up 13.5% on broad gains.”

USD/CAD levels