USD/CAD retreats to 1.2500 as oil consolidates biggest losses in two weeks
- USD/CAD pauses two-day uptrend, under pressure of late.
- Virus-led challenges to economic recovery weigh on the oil prices.
- Light calendar keeps traders at the mercy of risk catalysts.
After a two-day rebound from the monthly low, USD/CAD eases to 1.2500 amid the initial Asian session on Tuesday. In doing so, the Loonie pair seems to take clues from mildly bid oil prices amid a quiet session.
WTI defends $71.00, down 0.07% around $71.10 by the press time, following the heaviest declines in two weeks, portrayed the previous day. Downbeat PMIs from the US and China raised concerns that the coronavirus woes pose a serious threat to the global economic recovery. The same weighed on the oil prices on Monday.
Given the black gold’s heavy share in Canadian export income, a 2.8% daily loss helped USD/CAD even as the US dollar registered broad weakness on Monday. That said, the US Dollar Index (DXY) faded bounce off June 28 June, marked on Friday, while posting a 0.02% daily loss yesterday.
In addition to the energy moves, recent news from the International Monetary Fund (IMF), suggesting a record addition into the Special Drawing Rights (SDR), also keep WTI buyers hopeful amid dull Asian hours.
Amid these plays, S&P 500 Futures print mild gains and the US 10-year Treasury yields struggle around the July 20 levels after posting the lowest daily closing since February.
Moving on, updates from the US Senate, concerning the infrastructure spending, will join the covid news to direct short-term USD/CAD moves amid a lack of major data/events on the calendar.
Technical analysis
A two-week-old descending resistance line precedes 21-DMA, respectively around 1.2500 and 1.2540, to challenge short-term USD/CAD upside, a break of which could confirm the pair’s run-up to the 200-DMA surrounding 1.2595–2600. Meanwhile, the pair’s declines are likely to be challenged by a 100-DMA level near 1.2390.