USD/CAD bears flirts with yearly low near 1.3140 despite downbeat Oil price, firmer US Dollar ahead of US PMI

• USD/CAD remains pressured at the lowest level in nine months, down for the third consecutive day despite latest inaction.
• Oil Price drops amid market’s fears of economic slowdown, firmer US Dollar.
• Hawkish central bank actions, hints of “two more rate hikes” from Fed’s Powell underpin US Dollar.
• Preliminary PMIs for June can entertain Loonie traders but major attention will be given to risk catalysts for clear directions.

USD/CAD prints a three-day losing streak around 1.3145, despite the latest inaction, as it prods the lowest levels since September 2022 amid Friday’s Asian session. In doing so, the Loonie pair struggles to justify the broad US Dollar strength, as well as the Oil price weakness, as markets await the preliminary readings of the US S&P Global PMI for June.

That said, the US Dollar Index (DXY) bounced off a six-week low and printed the biggest daily gains since early June on Thursday, grinding higher around 102.40 by the pres time, after a slew of central banks announced interest rate hikes. Among them, the majority crossed the market consensus but failed to impress respective currencies on fears that the broad rate hikes have an economic toll, which in turn directs the market players toward the US Dollar’s haven demand.

Apart from the central bank moves, Fed Chair Jerome Powell’s hawkish statements and an absence of major disappointment from the US data also allowed the DXY to remain firmer, which should have put a floor under the USD/CAD at the yearly low.

Fed Chairman Jerome Powell repeated most of his previous day’s remarks during his testimony 2.0, this time in front of the Senate Housing Committee. However, his statements like, “(It) will be appropriate to raise rates again this year, perhaps two more times,” allowed the US Dollar to refresh the intraday high while eyeing to reverse Wednesday’s losses.

On the other hand, US Chicago Fed National Activity Index for May dropped to -0.15 versus 0.0 expected and upwardly revised 0.14 previous readings. Further, the Initial Jobless Claims reprinted the 264K figures (revised) for the week ended on June 16 compared to 260K market forecasts. It’s worth noting that the Continuing Jobless Claims dropped unexpectedly to 1.759M from 1.772M (revised) prior and 1.782M analysts’ estimations. Additionally, US Existing Home Sales marked a surprise recovery by 0.2% MoM for May compared to -0.6% expected and -3.2% prior (revised from 3.4%).

It’s worth noting, however, that the recent downbeat comments from Thomas Barkin, President of the Federal Reserve Bank of Richmond, as well as US Treasury Secretary Jannet Yellen, prod the US Dollar Index bulls amid a sluggish session. That said, Fed’s Barkin showed readiness to vote for rate cuts on conviction of a slowdown in inflation while US Treasury Secretary Yellen flags recession fears as Fed tightens policy.

While the US Dollar cheers the risk-off mood, the S&P500 Futures fail to portray the sour sentiment and grinds near 4,420 after mixed closing of Wall Street and upbeat US Treasury bond yields. That said, the US 10-year and two-year Treasury bond yields rose the most in a week to 3.80% and 4.79% in that order.

Looking ahead, market players may consolidate the previous heavy moves ahead of the key US PMIs for June. The same joins the Bank of Canada’s (BoC) surprise rate hike versus the Fed’s hawkish halt to keep the USD/CAD bears hopeful.

Technical analysis

Although a sustained downside break of the November 2022 low near 1.3225-30 keeps the USD/CAD bears hopeful. The oversold RSI conditions join the monthly falling wedge bearish chart formation, currently between 1.3060 and 1.3190, to challenge the sellers.