USD/CAD licks its wounds near multi-day low around 1.3600 as Oil price retreats

• USD/CAD stays defensive after bouncing off three-week low, prods two-day downtrend.
• Recent challenges to market’s optimism join firmer yields to underpin US Dollar rebound.
• WTI crude oil fails to cheer heavy inventory draw at the highest level in fortnight.
• BoC’s Gravelle, second-tier US housing data eyed for fresh impulse.

USD/CAD retreats from intraday high, fading bounce off three-week low, as it traces the early Wednesday’s sluggish markets around 1.3600. In doing so, the Loonie pair also takes clues from the lackluster prices of WTI crude oil, Canada’s main export item. However, the latest challenges to sentiment and the US Dollar’s corrective bounce prods the pair’s two-day downtrend near the multi-day bottom ahead of a speech from Bank of Canada (BoC) Deputy Governor Toni Gravelle.

That said, WTI crude oil seesaws around a two-week high as Oil buyers seek more clues to extend the latest gains, backed by heavy inventory draw and receding fears of the banking crisis. That said, the weekly prints of the American Petroleum Institute’s (API) Crude Oil Stock data marked a surprise daw in inventories by flashing -6.076M figure for the week ended on March 24 versus the previous addition of 3.262M.

On the other hand, US Dollar Index (DXY) picks up bids to 102.60 while printing the first daily gains in three. In doing so, the greenback’s gauge versus the six major currencies traces upbeat US Treasury bond yields amid mixed US data and the market’s indecision.

Talking about the prevailing cautious optimism, the Silicon Valley Bank (SVB) deal and policymakers’ efforts to defend their respective banking system, not to forget the central banks’ confirmations that the financial crisis is off the table, keep the market mildly positive. However, the latest geopolitical fears emanating from China join the upbeat US inflation expectations to trigger the US Dollar’s corrective bounce, due to the greenback’s haven appeal.

It’s worth observing that the recent US blacklisting of Chinese companies and China’s dislike for the meeting of the White House speaker and Taiwan President challenge the sentiment.

Amid these plays, US 10-year and two-year Treasury bond yields print a three-day uptrend around 3.58% and 4.10% respectively while the S&P 500 Futures print mild gains, the first in three.

Looking forward, USD/CAD traders should pay attention to risk catalysts, as well as a speech from BoC’s Gravelle for clear directions. However, major attention will be given to the US inflation data, up for release on Friday.

Technical analysis

50-day Exponential Moving Average (EMA) probes the Loonie pair’s two-day downtrend near 1.3590 at the latest. However, the Loonie pair’s failure to cross the key horizontal resistance surrounding 1.3845-65, established since September 2022, joins the bearish MACD signals and downbeat RSI (14), not oversold, to keep the Loonie pair sellers hopeful.