USD/CAD bulls eye monthly hurdle near 1.3480 amid softer Oil price, downbeat BoC talks

• USD/CAD remains firmer for the fourth consecutive day, approaches ascending resistance line from January 31.
• Dovish BoC comments versus hawkish Fed talks keeps the buyers hopeful.
• Oil price weakness, upbeat US data add strength to the upside momentum.

USD/CAD grinds higher past 1.3450 as bulls keep the reins during the fourth consecutive day amid the broad US Dollar strength, as well as downbeat prices of WTI crude oil, during early Friday. In doing so, the Loonie pair also justifies dovish commentary from the Bank of Canada (BoC) officials versus the hawkish remarks from the Federal Reserve (Fed) policymakers, not to forget the upbeat US data.

Earlier in Asia, BoC Deputy Governor Paul Beaudry mentioned, “Floating Canadian Dollar gives the bank the flexibility to chart a different path than trading partners and focus on setting interest rates.” The same underpins the dovish bias about the Canadian central bank, as previously confirmed by BoC Governor Tiff Macklem as he said on Thursday, “We’ve seen some evidence that our interest rate increases are starting to slow demand and rebalance our overheated economy."

On the other hand, Cleveland Fed President Loretta Mester teased the recession woes while repeating the previous defense of the highest rates. Previously, St. Louis Federal Reserve's James Bullard said, “Continued policy rate increases can help lock in a disinflationary trend during 2023, even with ongoing growth and strong labor markets, by keeping inflation expectations low.”

Talking about the data, US Producer Price Index (PPI) for January gained major attention from the USD/JPY buyers as it jumped the most since June with 0.7% MoM figure. Also positive for the pair was the improvement in the US Initial Jobless Claims for the week ended on February 10, 194K versus 200K expected and 195K prior. Alternatively, a slump in the Housing Starts for January and the Philadelphia Fed Manufacturing Survey for February seemed to have gained a little attention.

It should be noted that the WTI crude oil prints mild gains while paring the weekly losses around $78.40 by the press time. Given the Canadian economy’s reliance on the WTI exports, the weekly fall in the black gold’s price favors the USD/CAD bulls.

Other than the central bank talks, US data and Oil’s move, the geopolitical catalysts also propel the USD/CAD prices. That said, the fresh US-China tension and Russia’s refrain from stepping back when it comes to attacking Ukraine also weigh on the risk appetite and fuel the Loonie pair, due to the US Dollar’s safe-haven demand. That said, US President Joe Biden fired shots at his Chinese counterpart while conveying the expectations for a talk with the Chinese leader, during an interview with NBC News. “I think the last thing that Xi wants is to fundamentally rip the relationship with the United States and with me," said US President Biden per Reuters.

Amid these plays, the US 10-year Treasury bond yields rises to a fresh high since December 30, 2022, up 3.5 basis points to 3.87% by the press time. On the same line, two-year US Treasury bond yields print mild gains to end Thursday around 4.64%, the highest levels since November 2022, making rounds 4.65% at the latest. Furthermore, Wall Street closed negative and the S&P 500 Futures dropped 0.30% intraday by the press time. 

To sum up, the risk-off mood and hawkish Fed talks, versus the dovish BoC can keep the USD/CAD pair firmer even as the Oil price licks its wounds.

Technical analysis

USD/CAD pierces the 50-DMA hurdle surrounding 1.3470 to aim for a two-week-old resistance line near 1.3480.