USD/CAD bears take a breather above 1.3400 as Oil retreats, US PCE inflation eyed

• USD/CAD seesaws around intraday low during two-day downtrend.
• China data, cautious mood ahead of the key US statistics probes US Dollar bears.
• WTI crude oil eases amid hopes of OPEC+ policy rollover, higher US crude oil output.
• US Core PCE Price Index, ISM Manufacturing PMI and Canada S&P Global Manufacturing PMI will decorate calendar.

USD/CAD pares intraday losses around 1.3425 amid dicey markets during early Thursday, especially after the previous day’s heavy momentum. In doing so, the Loonie pair also takes clues from the recently downbeat prices of Canada’s main export item WTI crude oil, as well as justifies the cautious mood ahead of the key US data.

It’s worth noting that China’s latest activity numbers also seemed to have challenged the USD/CAD bears of late. That said, China’s Caixin Manufacturing PMI rose to 49.4 in November versus 48.9 market forecasts and 49.2 previous readings. Even so, the private activity gauge remains in the contraction region for the fourth consecutive month.

WTI crude oil prints mild losses around $80.60, pausing the three-day uptrend near the weekly high, amid speculations that the global oil producers may announce no policy change during this weekend’s OPEC+ meeting. Also likely to have probed the oil buyers could be the higher US supplies as Reuters quotes the US Energy Information Administration as saying, “US crude oil output surpassed 12 million barrels a day, the highest since before the onset of the coronavirus pandemic.”

Furthermore, a recent increase in the US inflation expectations, as per the 10-year and 5-year breakeven inflation rates per the St. Louis Federal Reserve (FRED) data, should have also probed the USD/CAD bears. On the same line were the downbeat comments from US National Security Adviser Jake Sullivan suggesting fresh challenges for the Sino-American optimists.

Previously, Fed’s Powell stated that it makes sense to moderate the pace of interest rate increases while also suggesting that the time to slow the pace of rate hikes could come as soon as the next meeting in December. On the same line was a member of the Fed Board of Governors Lisa D. Cook who praised the inflation data to signal that the Fed would likely take smaller steps as it moves forward.

Additionally, the recently easing virus-led activity controls in China and downbeat US data also weighed on the US Dollar the previous day. That said, the US ADP Employment Change data for November as it marked the lowest readings since January 2021 with a 127K figure for November versus the 200K forecast and 239K previous readings.

Moving on, risk catalysts could entertain USD/CADpair traders but major attention will be given to the Fed’s preferred inflation gauge, namely US Core Personal Consumption Expenditure (PCE) Price Index for October, expected 5.0% YoY in October versus 5.1% prior. Also important to watch will be the monthly prints of the US ISM Manufacturing PMI and Canadian S&P Global Manufacturing PMI for November, expected 49.8 and 49.3 versus 50.2 and 50.0 respective priors.

Also read: US October PCE inflation & ISM Manufacturing PMI Preview: Seen through Fed’s eyes

Technical analysis

Unless crossing the 1.3510 resistance confluence including the 200-SMA and 38.2% Fibonacci retracement level of the October-November downside, the USD/CAD buyers are likely to remain off the table.