USD/CAD bulls flirt with 1.2800 at 12-day-top on softer oil, strong USD ahead of Fed

• USD/CAD remains on the front for the fourth consecutive day, hovers around multi-day top marked on Friday.
• Strong Canada jobs report couldn’t supersede hot inflation data from the US as hawkish Fed bets increase.
• China’s worsening covid conditions add to the risk-off mood as market’s anxiety escalates ahead of the key data/events.

USD/CAD grinds higher around a fortnight top, up for the fourth consecutive day, as softer oil prices join the strong US dollar to favor bulls. That said, the Loonie pair stays firmer around 1.2800 during Monday’s initial Asian session.

Although Canada’s upbeat job numbers battled strongly with the US inflation data, the Fed-linked chatters kept the USD/CAD bulls on the throne. On Friday, the headline US Consumer Price Index (CPI) rose to 8.6% YoY versus 8.3% expected while the Core CPI jumped 6.0% YoY compared to the expected drop to 5.9% from 6.2% a month earlier. It’s worth noting that Canada’s Employment Change rose past 30K forecast to 39K while the Unemployment Rate dropped from 5.2% to 5.1%.

On the other hand, the University of Michigan Consumer Sentiment Index for June also refreshed the record to 50.2 versus revised down 58.1 but couldn’t derail the US dollar bulls.

Elsewhere, WTI crude oil prices printed the bearish Doji candlestick at a three-month high amid the market’s fears of a slowdown in the demand, mainly due to China’s covid conditions and growing monetary policy aggression of the major central banks. Also weighing on the black gold is the US dollar strength that has an inverse relationship with the oil prices.

Given the stronger US data increasing the odds of the Fed’s faster/heavier rate hikes, the market’s rush towards the risk-safety escalates ahead of Wednesday’s Fed meeting.

While the Fed is likely to keep USD/CAD bulls on the radar, any disappointment won’t be taken lightly and can trigger volatility in the markets. Hence, USD/CAD needs more care during this week.

Technical analysis

Successful break of the one-month-old descending trend line and the 50-DMA, respectively around 1.2470 and 1.2600, direct USD/CAD prices towards the yearly high marked in May, near 1.3075. That said, multiple hurdles marked during late May, around 1.2880-90, could offer an intermediate halt during the anticipated run-up.