USD/CAD steadies around 1.2700 ahead of US Inflation and Canada’s Employment data

• USD/CAD is juggling around 1.2700 as investors await US CPI and Canada’s labor market data.
• Stable or higher US CPI will strengthen the greenback bulls further.
• Canada’s administration may have generated 30k additional jobs in May.

The USD/CAD pair is oscillating in a narrow range of 1.2694-1.2710 in the early Tokyo session after a vertical upside move from 1.2550. The greenback bulls have witnessed a firmer buying tail after recording a monthly low at 1.2518 on Wednesday.  A buying tail represents a responsive buying action, which triggers when the market participants find the asset a value bet.

The greenback bulls are strengthened as investors have underpinned the negative market sentiment ahead of the US inflation. The upcoming US Consumer Price Index (CPI) event has created havoc in the FX domain.  The expectation of stability in the annual inflation rate is firming the odds of a prolonged hawkishness by the Federal Reserve (Fed). Stable or higher US CPI will bolster the odds of more 50 basis points (bps) rate hikes than expected earlier, which may trim the growth forecasts vigorously.

The loonie bulls have been dumped by investors on falling oil prices. The black gold has displayed a vulnerable performance in the Asian session and is expected to carry forward a similar sentiment in the European session. The oil prices have witnessed a corrective move after printing a two-month high of $123.12, however, the upside is intact on supply concerns. It is worth noting that Canada is a leading exporter of oil to the US and lower oil prices result in lower fund flows for Canada.

Apart from the US CPI, investors are awaiting the release of Canada‘s labor market data. As per the market consensus, Canada’s economy has added 30k new jobs on the labor market in May, almost double the prior print of 15.3k. Also, the Unemployment Rate is seen stable at 5.2%.