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%.
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
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.
