USD/CAD picks up bids to reverse the week-start pullback from monthly top. Cautious optimism underpins WTI rebound amid sluggish session. US Dollar remains on the way to posting the first monthly gain in five amid hawkish Fed concerns. Canada's Q4 GDP could help Loonie pair buyers on matching downbeat forecasts.
USD/CAD prints a gradual rebound from intraday low amid a sluggish end to February, picking up bids to 1.3585 heading into Tuesday’s European session. In doing so, the Loonie pair fails to justify the recent rebound in Canada’s key export item, namely WTI crude oil, as traders brace for the fourth quarter (Q4) Canadian Gross Domestic Product (GDP) data.
That said, the WTI crude oil bulls attack $76.00 while the refreshing intraday top, as well as reversing the previous day’s pullback from a one-week high. It should be noted that he hopes of easing US-China tension and hopes of upbeat inflation, as well as manufacturing activity in China, add strength to the black gold’s latest rebound. On the other hand, the US Dollar Index (DXY) prints mild gains around 104.80, following a downbeat start of the week, as greenback bulls cheer hawkish Fed bets despite mixed US data amid an unimpressive day so far.
Talking about the risk catalysts, market sentiment improves on headlines suggesting the fact that the US offers an olive branch to Chinese companies despite its political differences with the dragon nation. “Despite fraying relations with Beijing, US President Joe Biden is expected to forego expansive new restrictions on American investment in China, denying a push by some hawks in his administration and Congress,” reported Politico late Monday. However, US National Security Advisor Jake Sullivan’s comments on China suggest that the political tussle among the world’s top two economies stays on the table.
That said, mixed US data jostled with the hawkish Fed speak and the US-China tension contributed to the lack of market clarity. That said, US Durable Goods Orders slumped -4.5% in January versus -4.0% expected and 5.1% prior. However, the Nondefense Capital Goods Orders ex Aircraft grew 0.8% versus 0.0% analysts’ expectations and -0.3% previous readings. On the same line, the US Pending Home Sales rallied 8.0% MoM versus 1.0% expected and 1.1% prior. At home, Canada’s Q4 Current Account Deficit grew to -10.64B versus -8.41B.
Against this backdrop, the S&P 500 Futures print mild gains around 3,995, extending the week-start rebound from the monthly low, whereas the US two-year Treasury yields remain sidelined near 4.79% after reversing from a three-month high on Monday. That said, the US 10-year Treasury bond coupons seek clear directions near 3.92% following a downbeat start of the week.
Looking ahead, Canada’s Q4 GDP Annualized, expected to ease to 1.5% versus 2.9% prior, could keep the USD/CAD buyers hopeful. Also important to watch will be the second-tier US data, namely Conference Board’s Consumer Confidence, Chicago Purchasing Managers’ Index and Richmond Fed Manufacturing Index for February, as well as the preliminary US trade numbers for January.
Unless dropping back below the previous resistance line from early November, around 1.3570 by the press time, USD/CAD remains on the bull’s radar.