|

USD/CAD drops back below 1.2600 on sluggish oil, US inflation, Canada employment eyed

  • USD/CAD fades bounce off six-week low amid lackluster markets.
  • Oil prices struggle around three-month high as China’s post-covid unlock battles supply-linked headlines.
  • US NFP, hawkish Fedspeak renewed bets on Fed’s aggression but this week’s inflation data is the key.
  • BOC hiked rates for the second time in 2022, which in turn dims importance of Friday’s jobs report.

USD/CAD takes offers to refresh intraday low around 1.2580, reversing the previous day’s rebound from a 1.5-month low, as traders brace for this week’s key data/events during a sluggish Asian session on Monday.

Other than the cautious sentiment ahead of the US Consumer Price Index (CPI) for May, as well as Canada’s employment data for the said month, the market’s mildly positive sentiment also weighs on USD/CAD prices. Further, firmer prices of Canada’s key export item, namely WTI crude oil, also exert downside pressure on the Loonie pair.

That said, headlines from China appear risk-positive as the world’s second-largest economy braces for a faster bounce off the covid-led lockdowns, also stays ready for more stimulus. “Dine-in service in Beijing will resume on Monday, except for the Fengtai district and some parts of the Changping district, the Beijing Daily said. Restaurants and bars have been restricted to takeaway since early May,” reports Reuters.

Additionally, likely ease in the US-China trade relations also seems to underpin the cautious optimism in the market. While justifying the same, US Commerce Secretary Gina Raimondo said, per Reuters, “President Joe Biden has asked his team to look at the option of lifting some tariffs on China that were put into place by former President Donald Trump, to combat the current high inflation.”

However, Friday’s upbeat US jobs report and hawkish Fedspeak challenge the USD/CAD bears. That said, US Nonfarm Payrolls (NFP) came in 390K for May, more than 325K expected but lesser than the upwardly revised 428K previous readouts. Further, the Unemployment Rate remained unchanged at 3.6% versus expectations of a slight decline to 3.5%. Additionally, the US ISM Services PMI fell to 55.9 in May, versus 56.4 market consensus and 57.1 flashed in April. Following the data, Cleveland Fed President Loretta Mester crossed wires while saying that the one problem that the Fed has is inflation. The policymakers also added that the risks of a recession have gone up.

Elsewhere, WTI crude oil prices dribble around a three-month high, down 0.12% around $118.70 by the press time, as traders struggle between hopes of higher demand from China and OPEC+ announcement of more output. Also weighing on the black gold prices could be the fears of the global recession.

Amid these plays, Wall Street benchmarks closed in the red and the US 10-year Treasury yields posted the first weekly gain in three whereas the S&P 500 Futures remain mildly bid at around 4,100 by the press time.

While the upbeat risk appetite and an absence of oil selling keep USD/CAD bears hopeful, the Bank of Canada (BOC) has already announced the rate hike and hence this week’s Canada jobs report may not hold much importance. On the contrary, the US CPI will be crucial to watch for fresh impulses.

Technical analysis

A clear downside break of the two-month-old support line, now resistance around 1.2610, directs USD/CAD prices toward a late April swing low near 1.2460.

Additional important levels

Overview
Today last price1.2588
Today Daily Change-0.0006
Today Daily Change %-0.05%
Today daily open1.2594
 
Trends
Daily SMA201.2812
Daily SMA501.2715
Daily SMA1001.27
Daily SMA2001.2662
 
Levels
Previous Daily High1.2596
Previous Daily Low1.2551
Previous Weekly High1.2714
Previous Weekly Low1.2551
Previous Monthly High1.3077
Previous Monthly Low1.2629
Daily Fibonacci 38.2%1.2579
Daily Fibonacci 61.8%1.2568
Daily Pivot Point S11.2565
Daily Pivot Point S21.2536
Daily Pivot Point S31.2521
Daily Pivot Point R11.261
Daily Pivot Point R21.2625
Daily Pivot Point R31.2654

Author

Anil Panchal

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

More from Anil Panchal
Share:

Editor's Picks

AUD/USD stays defensive below 0.7150 after Chinese data

AUD/USD remains on the back foot below 0.7150 in the Asian session on Tuesday, close to an over three-week low touched the previous day. US bond yields hold near multi-year highs ahead of the FOMC meeting and oil-driven inflation risks, supporting the US Dollar and weighing on the currency pair. Mixed Chinese activity data for August also fail to inspire the Aussie.

USD/JPY extends gains toward 155.00 amid USD resurgence

USD/JPY keeps pushing higher toward 155.00 early Tuesday, looking for more upside, as traders await the FOMC and BoJ meetings this week. Meanwhile, Fed rate-hike bets and oil-driven inflation risks keep US bond yields near multi-year highs, supporting the US Dollar and the pair. That said, a more hawkish repricing of the BoJ normalization path might continue to underpin the Japanese Yen and could limit USD/JPY's upside. .

Gold at the mercy of bears; focus is on $4,250

Gold adds to Monday’s pessimism, struggling to extend the daily move above the $4,300 region per troy ounce and trading with modest losses on Tuesday. The precious metal’s extra weakness follows another positive day in the US Dollar, mixed US Treasury yields and steady pre-Fed caution.

Ripple, Cardano, Hyperliquid – Easing bullish momentum sparks downside risks

Top altcoins, including Ripple (XRP), Cardano (ADA), and Hyperliquid (HYPE), are trading in the red on Tuesday, with roughly 2% losses so far. The altcoins are facing downside pressure ahead of the CLARITY Act cloture vote scheduled for Tuesday.

Markets slide as FOMC approaches
The US Dollar remains strong as markets turn increasingly cautious ahead of the FOMC. Stocks are tumbling, while Gold and Silver are moving lower under pressure from the stronger Dollar. The Japanese Yen is weaker again, while Crypto is correcting. BTC is approaching a key technical test and could fall below its 50-week moving average, while ETH remains above $2,405.
Venezuela’s 65-billion-barrel Oil deal could reshape America’s inflation fight
The United States (US) has secured unprecedented access to part of Venezuela’s vast Oil reserves. The timing is particularly significant as the war with Iran is disrupting Middle Eastern supplies, keeping energy prices elevated and reviving concerns about inflation.