USD/CAD drops back towards 1.2400 with eyes on BOC
|- USD/CAD refreshes intraday low after Monday’s recovery lacks follow-through.
- New appointment in BOC, bullish WTI keep bears hopeful after strong Canadian jobs.
- US CPI, risk catalysts eyed for intermediate moves.
USD/CAD fails to extend the week-start rebound, down 0.07% around 1.2445, amid early Tuesday. In doing so, the Loonie pair justifies the market’s optimism from Wednesday’s Bank of Canada (BOC) monetary policy meeting amid upbeat fundamentals.
Among many positives that pushed BOC to lead the Western central banks towards tapering, price pressures and WTI strength could be cited as the key. Recent analysis from Reuters said, “Plunging Canadian immigration during the pandemic threatens to feed more persistent inflation pressures than the Bank of Canada is expecting, with data already showing signs of rising worker shortages that could push wages higher as the economy reopens.”
On the other hand, economic recovery gains momentum despite the covid Delta variant and backs the energy demand. The same joins OPEC+ indecision to keep oil prices near the highest since October 2018, up 0.12% intraday around $73.70 by the press time.
Additionally, a strong Canadian jobs report for June and the appointment of Carolyn Rogers as New Senior Deputy Governor of the BOC hints at further tapering on Wednesday.
It’s worth noting that the officials from the White House are also discussing the cross-border restrictions with Canada and other Western countries while staying cautious over the coronavirus (COVID-19) and its strains.
Amid these plays, market sentiment stays sluggish with the S&P 500 Futures taking rounds to record top, mildly offered of late, whereas the US 10-year Treasury yield rises for the third consecutive day to 1.373% by the press time.
Given the lack of major data ahead of the US session, covid headlines may entertain USD/CAD traders. However, US CPI will be key to watch on Tuesday as an uptick in inflation figures will renew reflation fears and put a safe-haven bid under the Loonie prices. It’s worth noting that nothing becomes more important than the BOC’s anticipated policy tightening.
Read: USD/CAD Weekly Forecast: Is the Canadian dollar a one-trick pony?
Technical analysis
Although failures to cross the 1.2600 hurdle weigh on USD/CAD prices, the 1.2400 threshold, comprising 100-day EMA and an ascending support line from June 09, becomes a tough nut to crack for the bulls.
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