USD/CAD kick-starts BoC week on dicey floor above 1.3400 amid sturdy Oil price, US Dollar

• USD/CAD stays defensive at the lowest levels in three weeks.
• Oil price pares intraday gains but stays firmer amid OPEC+ headlines, geopolitical woes.
• US Dollar cheers upbeat US NFP-led hawkish Fed concerns ahead of US data.
• BoC, Canada employment report will be the key for Loonie pair amid pre-FOMC blackout.

USD/CAD aptly portrays the Loonie traders’ anxiety above 1.3400, up 0.05% intraday near 1.3435 at the latest, as the key week comprising the Bank of Canada (BoC) Monetary Policy Decision and Canadian employment data begins with unimpressive moves. In addition to the pre-data/event caution, firmer prices of Canada’s main export item Crude Oil and the upbeat US Dollar also challenge the pair’s latest moves.

That said, WTI crude oil prints a three-day uptrend near $72.50 despite recently paring intraday gains while reversing from a one-week high amid the firmer US Dollar. That said, the black gold began the week’s trading with a gap-up amid headlines suggesting further reductions in Oil output from major producers.

Also read: WTI crude oil surpasses $73 amid OPEC+ and geopolitical events, despite firm USD

On the other hand, the US Dollar Index (DXY) extends the post-NFP run-up to 104.15 as it cheers the market’s sour sentiment and firmer US Treasury bond yields ahead of the key US ISM Services PMI and Factory Orders. It’s worth noting, however, that the Fed policymakers are stipulated for any public comments ahead of next week’s Federal Open Market Committee (FOMC), which in turn prod the DXY bulls.

That said, the US jobs report for May surprised markets with a jump in the headline Nonfarm Payrolls (NFP) by 339K versus 190K expected and 294K prior (revised). It’s worth noting, however, that the Unemployment Rate also rose to 3.7% from 3.4% prior, versus 3.5% market forecasts. It should be noted, that the Average Hourly Earnings eased whereas the Labor Force Participation Rate remain the same as previous.

Apart from that, the market’s sour sentiment due to the hawkish Fed bets and the geopolitical concerns about China, Russia, Ukraine and the US seem to also propel the USD/CAD prices while the US debt-ceiling extension and hopes of lesser rate hikes from the major banks weigh on the Loonie pair. Furthermore, the global rating agencies remain cautious about the US financial market credibility and prod the US Dollar despite the price-positive move on Friday. “Fitch Ratings said on Friday the United States' "AAA" credit rating would remain on negative watch, despite the agreement that will allow the government to meet its obligations,” said Reuters.

Looking ahead, US Factory Orders and ISM Services PMI for May will entertain intraday traders of the USD/CAD pair. However, major attention will be given to Wednesday’s BoC and Friday’s Canadian jobs report. While the Canadian central bank is up for no change in rates, any surprises won’t be taken lightly after the recent firmer Canada data.

Technical analysis

Repeated failures to stay beyond the 200-DMA, around 1.3510 by the press time, directs USD/CAD bears towards breaking an upward-sloping support line from November 2022, close to 1.3330 at the latest.