USD/CAD stays on the way to 1.2800 amid oil pullback, firmer USD

• USD/CAD edges higher around weekly top following a two-day uptrend.
• Sour sentiment underpins DXY run-up to multi-day top.
• WTI eases amid a downbeat EIA stockpile, concerns over China.
• China PMIs, US data will decorate calendar but qualitative factors are more important to follow.

USD/CAD bulls take a breather around 1.2760, following the heaviest daily jump in two weeks, amid Thursday’s Asian session. In doing so, the quote keeps the two-day recovery moves from the lowest level since September 10 but awaits more clues for fresh upside.

The latest pause in the USD/CAD prices could be linked to the market’s indecision amid negatives emanating from China and doubts over the US stimulus, as well as debt ceiling extension. Also contributing to the sluggish move could be the Fed tapering chatters and mixed clues for oil prices.

Amid these plays, the S&P 500 rises 0.17% intraday by the press time even as the Wall Street benchmark closed mixed.

The bulls have earlier cheered the risk-off-led US dollar strength, as well as doubts over further upside in prices of Canada’s key export item, WTI crude oil.

The concerns over the Fed’s tapering, fears that the world’s largest economy, namely China, is on the way to reversing the post-covid economic recovery and the US policymakers’ inability to provide the much-needed relief to the markets mainly contributed to the sour sentiment. Also challenging the risk appetite are the updates from Evergrande suggesting another coupon payment failure during the 30-day grace period.

Talking about oil prices, the official weekly inventories from the Energy Information Administration (EIA), 4.578M versus -1.652M expected and -3.481M prior, become the latest roll on the black gold. Also challenging the energy benchmark is the doubts over China’s economic transition as it is the world’s largest oil user. It’s worth noting that the hopes of pre-pandemic oil demand and geopolitical tensions and hurricanes contributed to the commodity’s previous strength.

Looking forward, US policymakers’ struggle in the Senate and China PMIs for August will be the key, not to forget Evergrande news, for fresh impulse ahead of the final reading of the US Q2 GDP and weekly jobless claims.

Technical analysis

USD/CAD rebound from 50-day EMA, around 1.2620 by the press time, looks to July’s monthly high near 1.2800 before 1.2830 and the monthly peak of 1.2896 questions the bulls.