USD/CAD bears flirt with 1.3000 on oil’s rebound, softer DXY, focus on Canada inflation

• USD/CAD takes offers to renew intraday low, down for the second consecutive day.
• Concerns surrounding China’s covid, OPEC output and Biden’s Middle East visit entertain oil buyers.
• Receding hawkish bets on the Fed, light calendar can help sellers ahead of Friday’s Canada inflation data, US PMIs.

USD/CAD holds lower ground near the intraday low, down for the second consecutive day, as the US dollar prints broad weakness while the prices of WTI crude oil recover from daily lows. In doing so, the Loonie pair sellers attack 1.3000 psychological magnet with eyes on Friday’s key data, as well as recession-linked chatters and oil updates, for fresh impulse.

US Dollar Index (DXY) extends Friday’s losses to 107.73, down 0.22% intraday, as traders curtail hawkish calls over the Fed’s next move. Behind the moves could be the recently mixed US data and slightly cautious Fedspeak.

Talking about the data, US Retail Sales for June grew 1.0% MoM versus 0.8% expected and -0.1% prior (revised from -0.3%) whereas the University of Michigan's Consumer Confidence Index edged higher to 51.5 in July's flash estimate, versus 49.9 expected and 50.0 prior. However, the Index of Consumer Expectations declined to its lowest level since May 1980 at 47.3. Further, the US Industrial Production also contracted by 0.2% MoM in June while the New York Empire State Manufacturing Index rose to 11.1 versus -2.0 expected and -1.2 prior.

On the other hand, Atlanta Fed President Raphael Bostic said on Friday that June's 75 basis points rate hike was a "big move" and added that the Fed wants policy transition to be orderly, as reported by Reuters. On the other hand, San Francisco Fed President Mary Daly said on Friday that the "Fed is working on getting down inflation without stalling economy." Further, St. Louis Federal Reserve Bank President James Bullard sounded neutral as he said, per Reuters, on Friday that it wouldn't make too much of a difference to do a 100 basis points (bps) or a 75 bps rate hike at the next meeting.

Elsewhere, US President Joe Biden’s struggle in the Middle East, to convince major producers to increase oil production, appears to help the WTI crude oil buyers of late. That said, the black gold picks up bids to consolidate intraday losses around $94.25 by the press time.

It’s worth noting, however, that China’s covid concerns and hopes of the US Senior Adviser for Energy Security Amos Hochstein’s expectations of more oil production from the Organization of the Petroleum Exporting Countries (OPEC) appear to weigh on the prices of the energy benchmark. It should be observed that WTI crude oil is Canada’s biggest export item and the same could actively direct USD/CAD moves.

Looking forward, traders’ indecision over the Fed’s next moves, despite recent optimism, could test USD/CAD moves ahead of Friday’s US preliminary PMIs for July and Canada’s Consumer Price Index (CPI) details.

Also read: USD/CAD Weekly Forecast: Will the central bank pas de deux continue?

Technical analysis

USD/CAD bears attack a five-week-old ascending support line as they poke the 1.3000 psychological magnet. That said, the impending bear cross on the MACD and recently steady RSI (14) appear to favor sellers of late. Alternatively, recovery moves need sustained trading beyond an ascending trend line from May 12, near 1.3085, to recall buyers.