USD/CAD auctions in balance around 1.3000 ahead of Fed Powell and Canada Inflation

The USD/CAD pair is oscillating in a narrow range of 1.2995-1.3015 in the early European session. A mild correction from Friday’s high at 1.3079 is expected to turn into a fresh leg of rally as the loonie bulls are expected to remain weak on higher forecasts for the Consumer Price Index (CPI) figures.

Statistics Canada is expected to report the annual CPI figure at 7.5%, much higher than the prior print of 6.8%. While the core CPI that excludes food and energy prices will land a 5.9% vs.5.7% reported earlier. This will definitely compel the Bank of Canada (BOC) to elevate its interest rates further. It is worth noting that the BOC has already elevated its interest rates by 50 basis points (bps) in June and a similar decision is expected in July monetary policy.

On the oil front, renewed recession fears have brought extreme selling pressure on the oil prices. The black gold has slipped below $110.00 as an extreme tightening policy is trimming the growth forecasts. At the press time, the oil prices are attempting to find a cushion below $110.00. It is worth noting that Canada is the leading exporter of oil to the US. Therefore, lower oil prices result in lower fund inflows for Canada.

Meanwhile, the US dollar index (DXY) is hinting at a bearish Double Distribution Day. The asset balanced in a 104.62-104.75 in early Tokyo and tumbled firmly. Now, the asset is distributing inventory lower in the 104.37-104.46 range. The asset has turned volatile as investors are awaiting the Federal Reserve (Fed) chair Jerome Powell’s testimony, which is due on Wednesday. Fed Powell is expected to dictate the likely monetary policy action of July.