USD/CAD bears take the baton at the start of the week, eye break and daily close below 1.2800

• USD/CAD bears take control at the start of the week ahead of key events.
• Risk appetite has improved and bulls are running out of steam.

USD/CAD is under pressure at the start of the week, losing the 1.28 level at the time of writing and down some 0.26%. The pair has fallen from a high of 1.2842 and has made a low of 1.2799 so far. The greenback has lost steam and ended its worst week since early February on the backfoot vs. a basket of rival currencies on Friday. In the open, the DXY index is down over 0.2% despite the fears of the impact of soaring inflation and Russia's invasion of Ukraine.

Risks to growth from aggressive monetary tightening, led by the Federal Reserve and China's strict lockdowns to quash a COVID-19 outbreak, the dollar's appeal as a haven was eclipsed by rising equities. Asian shares jumped on Friday after China cut a key lending benchmark to support a slowing economy and Wall Street followed suit. 

The S&P 500 turned marginally higher having briefly entered bear-market territory intraday. The S&P 500 closed at 3,901.36 while the Dow Jones Industrial Average also ended the day slightly higher, at 31,261.90. West Texas Intermediate crude oil futures rose by $1.02 to $113.23 a barrel, supportive of commodity-linked currencies such as CAD. Meanwhile, MSCI's broadest index of Asia-Pacific shares outside Japan was 0.04% higher in the open and Australian shares gained 0.2% while Japan's Nikkei stock index was 0.85% higher.

The week ahead

Meanwhile, for the week ahead, Retail Sales are expected to should rise by 1.0% in March on another large contribution from gasoline stations, although core sales (ex. autos/gas) and retail volumes should paint a much weaker picture, analysts at TD Securities said. ''Motor vehicles should weigh on the headline, leaving ex-auto sales up 2.0%, while furniture/building materials will face headwinds from a softening housing market.''

From the Fed, markets will be tuned in for the minutes of the prior board meeting and 50bps rate hike. ''Fed officials have continued to communicate their intent to bring inflation under control amid a push to get policy to neutral,'' analysts at TD Securities explained. ''Chair Powell has reiterated the Fed's guidance of consecutive 50bp hikes in June/July and the May meeting minutes are likely to provide colour about these discussions. A few Fed officials have hinted at slowing the pace of hikes after reaching neutral.''