USD/CAD sellers eye 1.3180 as Oil recovers, US Dollar struggles ahead of key Canada, Fed catalysts
- USD/CAD fades bounce off the lowest levels in nine months, renews intraday low of late.
- Oil price recovers amid geopolitical concerns, hopes of China stimulus.
- US Dollar cheers upbeat US data, hawkish Fed signals but cautious mood ahead of Powell’s testimony prod greenback buyers.
- Canada Retail Sales for May will also be important to watch for intraday clues.
USD/CAD prints the first daily loss in three around 1.3210 as it braces for the top-tier Canada and the US catalysts ahead of Wednesday’s European session. In doing so, the Loonie pair justifies the recently firmer price of WTI crude oil, Canada’s key export item, as well as the inactive US Dollar Index (DXY).
That said, the DXY struggles to extend the four-day downtrend amid mixed concerns about the Fed and the US-China tussle. Also likely to challenge the USD/CAD buyers, as well as favor the Oil Price recovery, could be China’s latest efforts to tame the recession woes, recently by the People's Bank of China (PBoC) rate cut and Ministry of Finance’s (MoF) announcement of cutting the purchase tax during 2024-25 and 2026-27.
On the other hand, the geopolitical fears surrounding the US and China weigh on the sentiment and put a floor under the US Dollar’s haven demand. Recently, China’s Ministry of Foreign Affairs (MoFA) said that the US has distorted its political promise to China. Late on Tuesday, US President Joe Biden termed Chinese President Xi Jinping a dictator and flagged concerns of intense Sino-American tension earlier in the day.
Additionally, hawkish comments from the Fed policymakers, mainly the nominees, and strong US housing data also allowed the USD/CAD bears to remain sidelined despite retaking control.
Against this backdrop, the US Dollar Index (DXY) stays defensive around 102.60 while keeping the four-day uptrend without marking keen interest to move toward the north. Additionally, WTI crude oil prints the first daily gains in three around $71.60 while &P500 Futures pause the week-start retreat from the highest levels in 14 months.
Moving on, Canada’s monthly Retail Sales for April will precede Fed Chair Jerome Powell’s bi-annual testimony to entertain traders.
Technical analysis
USD/CAD retreats from a three-week-old resistance line, around 1.3245 by the press time, as bears approach the yearly low marked earlier in the week surrounding 1.3180.
Author
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.
