USD/CAD stays firmer past 1.3450 on downbeat Oil price, focus on BoC’s Macklem, yields

• USD/CAD sticks to mild gains at the highest levels in a week.
• Oil price bears the burden of recession woes amid fears of higher interest rates.
• Downbeat prints of second-tier Canada data, unimpressive BoC talks propel Loonie prices.
• Risk catalysts, comments from BoC, Fed policymakers eyed for clear directions.

USD/CAD grinds higher as it approaches the 1.3500 round figure amid early Thursday morning in Europe. In doing so, the Loonie pair defends the previous day’s gains to refresh a one-week high as bulls turn cautious ahead of the key Canadian catalysts.

USD/CAD bulls cheer the downbeat Oil price, as well as the market’s rush towards risk safety, to refresh the multi-day high. That said, WTI crude oil renews a two-week low to around $78.30 as it drops for the fourth consecutive day. The black gold’s latest weakness could be linked to the looming fears of economic recession, backed by higher interest rates at the major central banks.

On the other hand, the US Dollar Index (DXY) benefits from the risk-off mood, even as it makes rounds to 102.00 of late. Recently, New York Fed President John Williams marked support for a 0.25% interest rate hike in May while saying, “Inflation is still too high, and we will use our monetary policy tools to restore price stability.” Just before him was Chicago Federal Reserve Bank President Austan Goolsbee who highlighted credit market strength as one of the key catalysts to watch ahead of the next Fed monetary policy meeting.

Considering the same, the market players place higher bets on the US central bank’s 0.25% rate hike in May, almost 85% at the latest, as well as reduce the probability of witnessing a rate cut in 2023.

On the other hand, fears of a full-blown China versus the West tussle, backed by allegations of Beijing’s support to Russia and a secret mission in cracking down the Western infrastructure via its technological advancements, weigh on the sentiment. Additionally, fears of easing consumer spending in the US, as per the credit card data update from Reuters, also weigh on the risk profile and fuel the USD/CAD price.

It should be noted that the downbeat prints of Canada’s Housing Starts, Industrial Product Price and Raw Material Price join the upbeat statements in the Fed Beige Book to offer additional upside catalyst for the Loonie pair.

While portraying the mood, the S&P 500 Futures print the first daily loss, so far, in four around 4,168, down 0.25% intraday by the press time. However, the US 10-year and two-year Treasury bond yields grind near 3.60% and 4.25% respectively after refreshing the monthly top the previous day.

Given the market’s downbeat sentiment and softer Oil price, the USD/CAD may remain firmer. However, comments from Bank of Canada (BoC) Governor Tiff Macklem and Deputy Governor Carolyn Rogers will be crucial, even if both of them are likely to defend the latest pause in the rate hike trajectory at home, which in turn can propel the Loonie pair prices. On the other hand, second-tier US data like Weekly Initial Jobless Claims, Philadelphia Fed Manufacturing Survey and Existing Home Sales, will be in focus. Above all, risk catalysts and yields will be crucial to determine immediate USD/CAD moves.

Technical analysis

USD/CAD bulls cheer an upside break of the one-month-old descending trend line, as well as the 100-SMA on the four-hour chart, respectively near 1.3465 and 1.3390. However, the overbought RSI (14) line challenges the Loonie pair’s further upside. The same highlights the 1.3500 round figure as an immediate hurdle ahead of the April 10 swing high of around 1.3555.