- USD/CAD continued losing ground for the second straight day amid sustained USD selling.
- Softer-than-expected US PCE Price Index data for April did little to impress the USD bulls.
- Even modest pullback in oil prices also did little to undermine the loonie or lend support.
The USD/CAD pair maintained its offered tone below mid-1.2700s, or over a three-week low through the early North American session and moved little post-US macro data.
The headline US Personal Consumption Expenditure (PCE) Price Index decelerated to a 6.3% YoY rate in April as against consensus estimates pointing to a steady reading of 6.6%. The Core PCE Price Index - the Fed's primary inflation measure - fell from 5.2% in March to 4.9% during the reported month, though was in line with market expectations.
The data indicated that inflationary pressures in the US might be easing and reaffirmed the idea that the US central could pause the current rate hike cycle later this year. This was evident from the recent slump in the US Treasury bond yields to a multi-week low, which, along with the risk-on impulse, weighed on the safe-haven US dollar.
The prevalent selling bias surrounding the greenback turned out to be a key factor that dragged the USD/CAD pair lower for the second successive day, back closer to the monthly swing low. Bulls seemed rather unimpressed and largely shrugged off modest pullback in crude oil prices, which tend to undermine the commodity-linked loonie.
With the USD price dynamics turning out to be an exclusive driver of the USD/CAD pair's ongoing downward trajectory, traders now look forward to the revised Michigan US Consumer Sentiment Index. This, along with the US bond yields and the broader market risk sentiment, will influence the USD and provide some impetus to the USD/CAD pair.
Technical levels to watch
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