USD/CAD skids below 1.2770 ahead of US PMI and Fed’s Powell speech

• USD/CAD is balancing below 1.2800 amid carnage in the DXY.
• An underperformance is expected from US PMI numbers in all aspects.
• Fed’s Powell may dictate a hawkish tone for the likely monetary policy action in June.

The USD/CAD pair is falling gradually lower after facing multiple failed attempts while attacking the round-level barricade of 1.2800 on Monday. The asset is expected to tumble further towards May 5 low at 1.2722 as the US dollar index (DXY) is eyeing an establishment below 102.00 ahead of the US Purchase Managers Index (PMI) numbers and speech from Federal Reserve (Fed) chair Jerome Powell on Tuesday.

The DXY extended its losses on Monday after slipping below the crucial support of 102.35. A downside move of almost 2.80% has been recorded by the DXY from its 19-year high of 105.00. Going forward, investors’ focus will remain on the US PMI numbers.

The S&P Global Composite PMI is seen at 55.5, lower than the prior print of 56. While the Manufacturing and Services PMI are expected to land at 57.9 and 55.4 respectively. A little underperformance is expected by the market participants as higher interest rates are signaling lower economic activities due to liquidity squeeze from the market, which could bring more weakness in the greenback.

Also, the speech from Fed chair Jerome Powell will remain on the investor’s radar. The major discussion could be interest rate guidance for the upcoming monetary policies, especially in June, which is expected to be highly hawkish amid stable inflationary pressures at elevated levels.

On the loonie front, the monthly Retail Sales numbers will be on the investor’s radar, which is due on Thursday. The monthly Retail Sales are expected to climb sharply higher to 1.4% against the prior print of 0.1%. However, the monthly Retail Sales that exclude auto sales are seen at 2%, a little lower than the former figure of 2.1%.