USD/CAD squeaks beyond 1.3100 as oil's rally confronts cautious sentiment ahead of Powell's speech
The USD/CAD recovers from its largest daily loss in two weeks due to a lackluster Asian session. Oil recovers from a near-eight-month low, as market mood declines prior to the ECB and Powell's address. The BOC raised rates by 75 basis points and signaled its willingness to do so further. It will be vital to monitor Fed Chair Powell's ability to defend aggressive rate increases.

During Thursday's Asian session, USD/CAD gains bids to retest its intraday high near 1.3135 as it consolidates its recent decline. In doing so, the Loonie pair pays little attention to the rise in WTI crude oil prices, Canada's primary export.
WTI crude oil extends its recovery from an almost eight-month low to $82.35 as of late Wednesday. In doing so, the price of black gold reverses course from the downwardly sloped support line established in May.
In spite of slow market sentiment as traders rush for risk-aversion before of the week's big events, particularly the monetary policy meeting of the European Central Bank (ECB) and Fed Chair Jerome Powell's speech, the US dollar regains the favor of buyers. The recent pause in US Treasury yields, following a reversal from the multi-day high, as well as hawkish Fed wagers, may also strengthen the dollar.
US Dollar Index (DXY) pares the largest daily loss in a month to about 109.80 as US 10-year Treasury yields halt Wednesday's decline by making a U-turn from the highest levels since mid-June. As of press time, S&P 500 Futures have rebounded from the lowest levels since July 19 and are fluctuating around 3,980. In addition, the CME's FedWatch Tool indicates a 77% chance of a September rate hike of 75 basis points (bps), up from 73% the day before.
Notably, covid worries originating from China also weigh on market sentiment and benefit USD/CAD bulls, as the South China Morning Post (SCMP) reported, "Shenzhen tightens entry quota for Hong Kong tourists."
The Bank of Canada's (BOC) 75 basis point (bps) rate hike and willingness to announce additional hikes sent the USD/CAD down from a nearly two-month high on Wednesday. Not to mention the mixed Fedspeak, better data from the major economies and the Fed's Beige may contribute to market confidence.
USD/CAD traders will closely monitor remarks from the BOC's Senior Deputy Governor Carolyn Rogers and Fed Chairman Jerome Powell for additional impetus.
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