USD/CAD hovers around 1.3000 as DXY steadies, oil stables below $101.00

• USD/CAD sees more downside below the psychological support of 1.3000.
• Falling oil prices have dented the demand for the loonie too.
• The US inflation is seen at 8.1% against the prior print of 8.5%.

The USD/CAD pair has witnessed a minor fall in the Asian session after printing fresh yearly highs at 1.3037. The asset may lose its three-day winning streak and will find a cushion near its crucial support at 1.2958.

Lonnie bulls have found modest strength on exhaustion in the US dollar index (DXY).  The DXY has tumbled below 103.60 after failing to sustain its 19-year high of 104.20. It is worth noting that the extent of weakness in the DXY is higher than the USD/CAD pair. This indicates significant weakness in the Canadian dollar led by a potential slippage in oil prices. The oil prices have tumbled to near $100 as higher interest rates by the Federal Reserve (Fed) are denting the demand forecasts. A tight policy environment will absorb the easy money from the economy and investments from the corporate will get trimmed. This will lower the job opportunities, aggregate demand, and henceforth the demand for oil.

The odds of a 75 basis point (bps) interest rate hike by the Fed are rising sharply despite the lower inflation forecasts. The US inflation, to be released on Wednesday, is seen at 8.1% against the prior print of 8.5%.  No doubt, the lower inflation print should trim the odds of a bumper rate hike, a figure of above 8% US inflation is still higher than the targeted inflation of 2%.