USD/CAD stumbles towards 1.2900 on higher oil prices and a soft US dollar

The USD/CAD snaps two straight weeks of gains and slumps 0.85% weekly.
Higher oil prices and an upbeat sentiment coupled with a weaker USD propel the CAD up.
Fed’s Bullard commented that fears of a US recession are overblown; expect the FFR to end at 3.5%.

Christian Borjon Valencia FXStreet

The USD/CAD slides from daily highs around 1.3000, set to finish the week with losses, amidst an upbeat market mood as traders scaled back aggressive tightening by the US Federal Reserve. At the time of writing, the USD/CAD is trading at 1.2914.

A positive mood and higher oil prices underpin the CAD

Global equities are rising, depicting an upbeat mood on Friday. Recession fears surround the markets, though, despite the aforementioned, investors begin to assess “possible” first-rate cuts in 2023, appearing to be too soon to predict what will happen to the economy.

In the meantime, the USD/CAD is falling as investors reprice Fed’s interest rate hikes. Consequently, US Treasury yields dropped, so demand for the greenback descended. Besides that, higher US crude oil prices, with Western Texas Intermediate (WTI) snapping two days of losses, up by 3.68% at $108.14 BPD, boost the Loonie, a headwind for the USD/CAD.

The US Dollar Index (DXY), a measurement of the greenback’s value against some currencies, lurks some 0.24% at 104.149. Taking a glance at the DXY daily chart, the index is consolidating and forming an ascending triangle, threatening to lift the DXY higher.

In the meantime, Fed speaking continued, now taking the stand the St. Louis Fed President James Bullard. He said that fears of a recession in the US are overblown. Bullard stated that the US will be fine and that tightening policy will slow down the economy to a trend pace of growth. He reiterated that the Federal funds rate (FFR) would need to move to 3.5% this year.

On Wednesday, the Bank of Canada Senior Deputy Governor Carolyn Rogers said that May inflation data was an unwelcome number but not unexpected. When asked about 75 bps rate hikes, she commented that the decision would be made until July.

Data-wise, the Canadian calendar unveiled Average Weekly Earnings for April, which expanded by 4%, lower than the previous reading. On the US front, the economic docket featured the UoM Consumer Sentiment on its final reading for June, which plunged to 50.

USD/CAD Key Technical Levels

Overview
Today last price	1.2914
Today Daily Change	-0.0080
Today Daily Change %	-0.62
Today daily open	1.2994

Trends
Daily SMA20	1.2778
Daily SMA50	1.2796
Daily SMA100	1.2728
Daily SMA200	1.2677

Levels
Previous Daily High	1.3018
Previous Daily Low	1.2936
Previous Weekly High	1.3079
Previous Weekly Low	1.2774
Previous Monthly High	1.3077
Previous Monthly Low	1.2629
Daily Fibonacci 38.2%	1.2987
Daily Fibonacci 61.8%	1.2967
Daily Pivot Point S1	1.2948
Daily Pivot Point S2	1.2901
Daily Pivot Point S3	1.2867
Daily Pivot Point R1	1.3029
Daily Pivot Point R2	1.3064
Daily Pivot Point R3	1.3111

Author

Christian Borjon Valencia

FXStreet

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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