USD/CAD stages an impressive comeback above 21-DMA ahead of key data

• USD/CAD recaptures 1.2700 and beyond amid broad USD bounce.
• Retreat in WTI prices also helps push USD/CAD higher.
• All eyes remain on the US inflation and Canadian GDP release.

USD/CAD is extending gains towards 1.2750, finding support from the broad-based US dollar rebound, as the risk sentiment remains on the tepid side. The US dollar index is rising by 0.08% on the day, currently trading at 94.31.

Markets remain worried about a likely US government shutdown amid a delay in the infrastructure bill vote, as the final quarter of 2021 commences. Further, looming China Evergrande risks and stagflation concerns also leave investors on tenterhooks.

The spot also benefits from a minor pullback in WTI prices from near three-year tops of $76.50. Reports that OPEC is considering release more oil to the markets to counter the ongoing supply crunch are weighing on the black gold. Although, China’s willingness to buy more oil other energy supplies to meet growing demand cushions the downside.  

Attention now turns towards the US ISM Manufacturing, Fed’s favorite PCE Inflation gauge and the Canadian monthly GDP release for fresh trading opportunities.

The downside in the spot could likely remain capped so long as it holds above the 21-Daily Moving Average (DMA) at 1.2683. To the upside, acceptance above 1.2750 is needed to resume the recent uptrend.

USD/CAD: Additional levels