USD/CAD sees a bumpy ride as DXY slips below 105.00, oil rebounds

• USD/CAD is likely to display some losses as DXY skids and oil rebounds.
• As per Fed Powell, even a spree of rate hikes doesn’t guarantee the return of the inflation rate to 2%.
• Oil prices witnessed a significant correction as comments from central banks diminishes demand forecasts.

The USD/CAD pair has sensed barricades around the round-level resistance of 1.2900 in the Asian session. The asset has witnessed offers as the US dollar index (DXY) is going through a mild correction after failing to cross the critical hurdle of 105.19. The loonie bulls may drive the asset lower if it slips below the crucial support of 1.2877.

On a broader note, the DXY is principally strong as the Federal Reserve (Fed) looks bound to step up the interest rates further. Fed chair Jerome Powell is dictating on a repetitive note that the Fed is ‘unintentionally committed’ to bringing price stability to the economy. To fulfill the objective, interest rate elevation is the only measure as balance sheet reduction has already been announced.

The Fed has raised its interest rates to 1.50-1.75% in its last three monetary policy meetings, however, no impact has been recorded on the inflation rate. Therefore, more rate hikes look possible in the upcoming policy meets. One thing that has bolstered the DXY for a prolonged period is the statement by Fed Powell that even a spree of rate hikes doesn’t guarantee that the inflation rate will return to 2% from a whopping figure of 8.6% recorded for May.

On the oil front, a firmer rebound has been witnessed in the oil prices. The oil prices witnessed a steep correction on Wednesday after the comments from central banks in ECB’s annual Forum on Central Banking diminished the growth forecasts. It is worth noting that Canada is a leading exporter of oil to the US and a rebound in oil prices may support the loonie bulls.