USD/CAD slides towards 1.3700 as Oil rebounds, US Dollar struggles amid mixed mood

• USD/CAD stays pressured around intraday low, extends late Friday’s pullback.
• Market’s cautious optimism, downbeat comments from Fed’s Kashkari weigh on US Dollar.
• Fears emanating from Russia, US Dollar retreat allow WTI crude oil to pare recent losses.
• Canada GDP, Fed’s preferred inflation eyed for clear directions.

USD/CAD prints mild losses as it extends the late Friday’s pullback from the highest levels in eight days to 1.3730 during Monday’s sluggish Asian session. In doing so, the Loonie pair cheers the US Dollar’s pullback, as well as firmer prices of Canada’s key export earner, namely WTI crude oil.

US Dollar Index (DXY) snaps two-day rebound as it retreats to 103.00 after Minneapolis Fed President Neel Kashkari flags fears of US recession. Also weighing on the greenback could be the US Treasury bond yields’ failure to regain upside momentum.

It’s worth noting that headlines from Bloomberg seemed to have contributed to the risk-on mood and weighed on the US Dollar, allowing USD/CAD to ease. “First Citizens BancShares Inc. is in advanced talks to acquire Silicon Valley Bank after its collapse earlier this month, according to people familiar with the matter,” said Bloomberg.

On the other hand, WTI crude oil rises half a percent intraday to near $69.70 while printing the first daily gains in three. The black gold’s latest gains could be linked to the cautious optimism in the market, as well as the headlines suggesting Russia’s shifting of nuclear weapons near Belarus. “The North Atlantic Treaty Organization (NATO) NATO on Sunday criticized Vladimir Putin for what it called his ‘dangerous and irresponsible’ nuclear rhetoric, a day after the Russian president said he planned to station tactical nuclear weapons in Belarus,” per Reuters.

It should be noted, however, that the mostly upbeat US data and an absence of dovish remarks by the Fed policymakers in the last week seemed to have favored the USD/CAD bulls.

That said, US Durable Goods Orders for February dropped by 1.0% versus January's fall of 5% (revised from -4.5%) and the market expectation for an increase of 0.6%. Details suggested that the figure for Durable Goods Orders ex Defense and ex Transportation were also downbeat but Nondefense Capital Goods Orders ex Aircraft came in firmer-than-expected 0.0% to 0.2%, versus 0.3% prior. Moving on, the preliminary readings of the US S&P Global PMIs for March came in firmer as the Manufacturing gauge rose to 49.3 from 47.3 in February, versus 47.0 expected, while Services PMI rose to 53.8 from 50.6 prior and 50.5 expected. With this, the S&P Global's Composite PMI increased to 53.3 from 50.1 in February, versus 50.1 market forecasts.

Following the data, Atlanta Fed President Raphael Bostic told NPR that it was not an easy decision to raise the policy rate while also adding that he is not expecting the economy to fall into recession. Further, St. Louis Federal Reserve President James Bullard, a policy hawk, said on Friday that the response to the bank stress was swift and appropriate, allowing the monetary policy to focus on inflation, per Reuters. The policymaker also added that the projections suggest one more rate hike that could be at the next FOMC meeting or soon after.

Against this backdrop, S&P 500 Futures trace Wall Street’s mild closing while the US Treasury bond yields remain pressured.

Looking ahead, Fed talks and second-tier US data may entertain DXY traders ahead of the Fed’s preferred inflation gauge, namely the Core Personals Consumption Expenditure (PCE) Price Index. Should the inflation numbers print strong outcomes, the greenback has scope for recovery.

Technical analysis

Unless dropping back below the two-week-old previous resistance line, around 1.3685 by the press time, USD/CAD remains on the bull’s radar.