USD/CAD struggles below 1.2800 despite softer oil prices, anxiety ahead of Fed Minutes
|- USD/CAD remains directionless after posting the biggest weekly loss in 2022.
- Oil prices fail to cheer hopes of more demand amid mixed macros, cautious mood ahead of FOMC Minutes.
- China’s monthly data dump to offer immediate directions.
USD/CAD seesaws around 1.2770-80 during Monday’s initial Asian session as bears take a breather after the biggest weekly fall in eight months. The Loonie pair’s latest inaction could also be linked to the market’s anxiety ahead of the key data/events scheduled for publishing, as well as mixed headlines released during the weekend. It’s worth noting that the quote’s latest performance ignores the recently softer prices of Canada’s main export item, WTI crude oil.
That said, the WTI crude oil prices remain pressured towards $91.00, down 0.25% intraday after staging a weekly rebound. In doing so, the black gold ignores upbeat comments from Amin H. Nasser, CEO of Saudi Aramco who said, “Oil demand to continue to grow for the rest of the decade, despite downward economic pressures on short-term global forecasts.”
Elsewhere, chatters of a meeting between US President Joe Biden and his Chinese counterpart Xi Jinping, as signaled by the Wall Street Journal (WSJ), appeared to have favored the risk-on mood. Also positive for the mood were headlines suggesting improved coronavirus conditions in China's financial hub Shanghai. However, the increased count of the US lawmakers who is visiting Taiwan challenges the sentiment.
It’s worth mentioning that the pair’s latest run-up appeared to justify the US dollar’s broad weakness amid softer inflation data. The reason could be linked to the hawkish comments from the Fed policymakers.
On Friday, Richmond Federal Reserve (Fed) Bank President Thomas Barkin said he wants to raise interest rates further to bring inflation under control. Even so, the policymaker added that he would watch the US economic data to decide how big a rate hike to support at the Fed's next meeting in September. "I'd like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory," Barkin told CNBC, per Reuters.
Previously San Francisco Fed President Mary Day backed opportunities of witnessing another 75 basis points (bps) of a rate hike in September, while also suggesting an upfront 0.50% rate hike to be sure.
Also, Minneapolis Fed President Neel Kashkari and Chicago Fed President Charles Evans sounded grim. That said, Fed’s Kashkari mentioned that he hasn't "seen anything that changes" the need to raise the Fed's policy rate to 3.9% by year-end and to 4.4% by the end of 2023. Further, Fed policymaker Evans stated, “The economy is almost surely a little more fragile, but would take something adverse to trigger a recession.” Fed’s Evans also called inflation "unacceptably" high.
Amid these plays, Wall Street closed firmer but the S&P 500 Futures print mild losses at the latest. That said, the US 10-year Treasury yields closed mildly negative, down 5.6 basis points (bps) to 2.83%, but remains sidelined at around 2.84% at the latest.
Canada’s inflation numbers and Federal Open Market Committee (FOMC) Minutes will be crucial for the USD/CAD pair traders. However, China’s monthly Retail Sales and Industrial Production for July will offer immediate directions.
Technical analysis
USD/CAD bears remain hopeful until the quote stays below the 100-DMA level surrounding 1.2805.
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