USD/CAD stays below 1.3300, takes clues from WTI recovery, risk-tone

• Increasing optimism in Asia, oil’s recovery from multi-week low exert pressure on USD/CAD.
• Additional signals for Friday’s US jobs report, risk catalysts will be in the spotlight.

USD/CAD remains under 1.3300 for the fourth consecutive day while flashing 1.3287 during the early Thursday. The pair’s latest pullback could be attributed to the pullback in WTI oil prices as well as the market’s favor for commodity-linked currencies amid broad risk-on.

WTI oil prices seem to follow broadly positive trade sentiment as well as upbeat data from the top-tier economies. It should also be mentioned that inventory data for the week ended on January 31 signaled a build but was largely ignored.

On the data front, be it headline activity numbers from the US, EU and the UK or the early indicators of Friday’s US jobs report, most of the results have painted a rosy picture of the global economy. While highlighting that JP Morgan’s Global PMI Composite Output Index hit 10-month high.

About the risk, coronavirus keeps spreading and has crossed 28,000 mark as far as infected people in China are concerned. Majority of global peers have travel bans in place while some of them are searching for cures, but seem to have failed so far.

To portray this, Asian equities remain on the front foot while the US 10-year treasury yields also add one basis point (bps) to its 14-bps recovery in the last three days.

Traders will now focus on the US Nonfarm Productivity, Unit Labor Costs and Jobless Claims numbers to take a better view of Friday’s employment data. Analysts at TD Securities sound upbeat on the US data as they say, “We expect initial jobless claims to remain steady at 215k for the week of Feb 1, which is also largely in line with consensus expectations. We also look for productivity growth to bounce back to 1.7% in Q4 after a 0.2% decline in the prior quarter and a slowdown in ULC to 1.3% from 2.5% in Q3.”

Technical Analysis

Unless slipping back below the five-month-old falling trend line, at 1.3280 now, prices can continue challenging 1.3300 mark to take aim at November and October month highs near 1.3330 and 1.3350.