USD/CAD stabilizes above 1.3200 following footprints of sideways oil and USD Index

• USD/CAD is showing lackluster action following the footprints of the sideways USD Index and oil prices.
• Interest rate guidance and a detailed explanation behind a skip in the policy-tightening regime by Fed Powell will be keenly watched.  
• The upside in the oil price seems restricted above $72.00 despite the rate cut by the PBoC.

The USD/CAD pair is demonstrating topsy-turvy moves above the round-level support of 1.3200 in the London session. The Loonie asset is showing lackluster action following the footprints of the sideways US Dollar Index (DXY) and oil prices.

S&P500 futures have recovered some of the losses but caution prevails as the US opening session is expected to remain volatile. Investors are expected to wind up their positions after an extended weekend, which might create sheer volatility.

The US Dollar Index (DXY) is hovering around 102.48 as investors are keeping an eye over the Federal Reserve (Fed) chair Jerome Powell’s testimony. Interest rate guidance and a detailed explanation behind a skip in the policy-tightening regime will be keenly watched.  

Meanwhile, the Canadian Dollar will dance to the tunes of the Retail Sales data (April). Monthly Retail Sales data is seen expanding by 0.2% against a contraction of 1.4% witnessed earlier. Economic data excluding automobile numbers is seen expanding by 0.4%. This indicates that demand for automobiles have remained weak as higher inflationary pressures are biting the income of households. Also, individuals are postponing demand for automobiles to avoid higher installment obligations due to elevated interest rates by the Bank of Canada (BoC).

On the oil front, the upside in the oil price seems restricted above $72.00 despite a rate cut by the People’s Bank of China (PBoC). China’s central bank cuts its benchmark Loan Prime Rates (LPRs) by 10 basis points (bps) due to which the one-year LPR was reduced from 3.65% to 3.55% while the five-year LPR was trimmed to 4.20%. The higher monetary stimulus might accelerate oil demand ahead.

It is worth noting that China is the largest importer of oil in the world and expansionary PBoC monetary policy would support the oil price ahead.