USD/CAD reverses Canadian CPI-led dip, clings to modest gains ahead of FOMC minutes
|- A combination of factors assisted USD/CAD to gain some positive traction on Wednesday.
- A pickup in the US bond yields, risk-off mood extended some support to the safe-haven USD.
- Sliding oil prices undermined the loonie, though a stronger Canadian CPI report capped gains.
- Investors remain on the sidelines as the focus remains glued to the FOMC meeting minutes.
The USD/CAD pair refreshed daily lows in reaction to stronger Canadian consumer inflation figures, albeit lacked any follow-through selling. The pair was last seen trading near the top end of its daily traidng range, around the $1.2080-85 region.
The pair gained some positive traction on Wednesday and built on the previous day's goodish rebound from the vicinity of the key 1.2000 psychological mark, or multi-year lows. The uptick was supported by a modest US dollar uptick and sliding crude oil prices, which tend to undermine demand for the commodity-linked loonie.
The USD found some support from a fresh leg up in the US Treasury bond yields. Apart from this, a selloff in the equity markets provided an additional lift to the safe-haven greenback. The USD positive move could further be attributed to some repositioning trade ahead of Wednesday's release of the FOMC meeting minutes.
Meanwhile, oil prices extended the overnight retracement slide from over two-month lows and witnessed heavy selling for the second consecutive session on Wednesday. This was seen as another factor that acted as a tailwind for the USD/CAD pair. That said, hotter-than-expected Canadian consumer inflation capped any further upside.
Data published by Statistics Canada revealed that the headline CPI rose to 3.4% in April from 2.2% in the previous month. This was higher than consensus estimates pointing to a reading of 3.2%. On a monthly basis, the CPI arrived at 0.5% during the reported month as against market expectations for a modest downtick to 0.4%.
The data bodes well with a more hawkish Bank of Canada, though did little to provide any meaningful boost to the Canadian dollar. Investors seemed reluctant to place any aggressive bets, rather preferred to wait on the sidelines and look forward to the highly-anticipated FOMC minutes for a fresh directional impetus.
Technical levels to watch
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