USD/CAD marches firmly towards 1.3100 as investors prepare for FOMC’s minutes

The USD/CAD rises for the second consecutive day, extending its weekly gains to almost 1.50%, courtesy of a buoyant greenback and falling crude oil prices. At the time of writing, the USD/CAD is trading at 1.3066, albeit in positive territory, a few pips shy of the YTD high around 1.3083.

USD/CAD falls on a risk-off mood, a solid buck, and falling oil prices

Sentiment stays negative as USD/CAD traders prepare to digest June’s Federal Reserve Open Market Committee (FOMC) minutes. During the New York session, US Services and Composite-related PMIs, released by S&P Global and the Institute for Supply Management (ISM), beat expectations but trailed May’s reading, illustrating that the US economy is slowing down. Additionally, fears of a global recession, and China’s new coronavirus crisis, keep global equities under pressure, US Treasury yields climbing, and the US dollar bid.

The US Dollar Index is gaining 0.66%, up at 107.194, underpinned by high US Treasury yields. Contrarily, the US crude oil benchmark WTI plunges 2.74% in the day, exchanging hands at $96.62 per barrel, which is a tailwind for the major.

All that said, investors’ eyes are focused on the Fed. Although it is usually an overvalued event, any forward guidance would be greatly appreciated by investors.

Meanwhile, money market futures began to show that traders expect the Fed to slash rates in the middle of 2023. Investors forecast a 75 bps rate hike for the July meeting, and the STIRs markets depict that the Federal funds rate (FFR) will peak at 3.25% before easing to 3.04% by June 2023.

In the week ahead, the Canadian docket will feature May’s Balance of Trade, Exports, and Imports. On the US front, the economic calendar will feature Fed speakers – Christopher Waller and James Bullard – US Initial Jobless Claims and Nonfarm Payrolls.

USD/CAD Key Technical Levels