USD/CAD settles at 1.3350, a one-month high, as the Oil price and US Dollar weaken

The USD/CAD currency pair has stabilized around the 1.3350 mark, a significant one-month high, in a volatile market landscape where key US economic data is keenly anticipated. This relative steadiness is due to a mix of contributing factors, including the decline in Oil prices and a lukewarm performance by the US Dollar Index (DXY).

The recent fluctuations in WTI crude oil prices have been striking. The commodity rose to its highest point since April 17, before abruptly reversing course and suffering its largest losses in six weeks. This sudden swing was instigated by an increase in risk aversion and rising speculation that Oil producers, especially those in OPEC+, are resistant to further production cuts. As per Reuters’ sources, the Oil cartel is likely to maintain its current output policies in its upcoming meeting on August 4. Consequently, WTI crude oil prices are currently on a two-day downward trend, trading approximately at $79.20 per barrel, indicating a 0.40% intraday drop.

Conversely, the US Dollar Index (DXY) found some resilience amidst the risk-averse market atmosphere. Boosted by robust US Treasury bond yields, the DXY hit a three-week peak. Moreover, encouraging US ADP Employment Change figures for July added to the positive outlook for the US Dollar. However, a persistent resistance line that’s held for nine weeks is limiting the DXY’s gains, keeping the gauge steady against six major currencies at 102.60.

Interestingly, the earlier risk-off sentiment appeared to be mitigated, thanks to reassurances from US Treasury Secretary Janet Yellen and White House Economic Adviser Jared Bernstein, who defended US Treasury bonds. This support helped ease market anxieties, providing some stability to the USD/CAD pair.

Despite the general strength of the US Dollar, the US 10-year Treasury bond yields climbed to their loftiest level since November 2022, highlighting the ongoing market uncertainty and unease. Furthermore, Wall Street benchmarks ended in negative territory, reflecting a bearish investor sentiment. As a result, the S&P500 Futures are stuck at a two-week low after two days of consecutive losses.

In the foreseeable future, USD/CAD traders will be keeping a close eye on several US economic data releases, particularly those related to employment and economic activity. Key indicators include the US ISM Services PMI, Factory Orders, Weekly Initial Jobless Claims, as well as Nonfarm Productivity and Unit Labor Costs quarterly figures. These updates are projected to significantly influence the USD/CAD pair and could determine its trajectory in the short term.