USD/CAD seesaws around 1.2600 amid softer oil prices, downbeat USD

• USD/CAD struggles to extend recovery moves but bulls stay hopeful.
• Oil prices bear the burden of Russian support to OPEC+ output hike, ignore bullish inventories.
• US data tame tapering tantrum, firmer Canadian numbers fail to propel CAD.
• Second-tier data from the US, Canada will be eyed ahead of Friday’s key numbers.

USD/CAD remains sidelined around 1.2600 following its bounce off two-week low, portrayed on Tuesday. That said, the Loonie pair seesaws near 1.2620 during early Thursday morning in Asia.

While the recently weaker oil prices weigh on the Canadian dollar (CAD), broad US dollar weakness, mainly due to the downbeat US data and risk-on mood challenge USD/CAD sellers. Hence, USD/CAD traders await a strong catalyst for further direction even as buyers stay hopeful.

That said, the ADP Employment Change for August rose 374K versus expectations of a 613K rise. Also challenging the jobs scenario was the employment component of the ISM Manufacturing PMI that slumped to the contraction region with the 49.0 figures against 52.9 prior. On the other hand, Canada Markit Manufacturing PMI rose past 56.4 market consensus to 57.2 in August.

It’s worth noting that the Russian favor to the OPEC+ production hike exerts downside pressure on the oil prices, Canada’s key export item, especially when the coronavirus woes weigh on the demand outlook. In doing so, the black gold fails to cheer higher-than-expected draw in the inventories, as per weekly readings of the US Energy Information Administration’s (EIA) Crude Oil Stocks Change figures, -7.169M versus -3.088M expected. Against this backdrop, WTI dropped to the fresh weekly low, before bouncing off $67.00, while declining for the second consecutive day on Wednesday.

It should be noted that the recently easing covid cases in the West push the Canadian authorities to emphasize the vaccine passports. News that Canada’s largest state Ontario will require digital proof of covid vaccination to visit bars, restaurants, nightclubs and indoor sporting facilities starting from October 22 take rounds of late.

While downbeat US job-related data hints at softening of Friday’s key employment report, the same also push back the Fed’s tapering concerns and favor the risk-on mood.

Hence, the Wall Street benchmarks managed to recover initial losses, closing mixed, whereas the US 10-year Treasury yields eased 0.3 basis points (bps) to 1.299% by the end of Wednesday’s North American session. Further, the S&P 500 Futures rise 0.07% at the latest.

Moving on, second-tier US employment data like Nonfarm Productivity for Q2 and weekly jobless claims will join Canada’s housing and trade numbers for July to entertain intraday traders of the USD/CAD pair. However, major attention will be given to Friday’s US Nonfarm Payrolls (NFP) and hence sluggish moves for today, mostly depending upon oil prices momentum, can’t be ruled out.

Technical analysis

Although failures to rise much beyond 1.2600 probes USD/CAD buyers, a convergence of 20-DMA and monthly support line, near 1.2610–15 challenges short-term sellers. Also acting as a tough downside barrier for the bear’s entry is the 200-DMA level of 1.2535.