USD/CAD bears move in as the USD Dollar slides

• USD/CAD has been range bound in North American trade as the US Dollar slides.
• Bears are in control as domestic data beats expectations and oil rebounds.

USD/CAD has been a two-way business in the US session, trading between 1.3383 and 1.3453 on the day so far. At 1.3397, the pair is down by some 0.4% as the US Dollar retreated across the board while investors look past worries about China's COVID flare-ups.

A risk on theme came onto the scene in Asia on Monday that supported high beta currencies such as the commodity complex. The Canadian dollar rose on firm preliminary domestic data as well that showed Retail Sales beat expectations -0.5 to -0.7.   

Meanwhile, speculators’ net short CAD positions increased modestly though they remain below their recent highs, analysts at Rabobank explained. ''Focus recently has been on the oil price but also on the broad-based direction of the USD.''

Oil rebounds

As for oil, prices there have also gained ground early on Tuesday. A report that OPEC+ planned to raise production sent prices to the lowest since January, only to recover after Saudi Arabia and other members firmly denied the group was planning the move, Reuters reported. A further drop in prices could lead OPEC+ to cut production further.

Elsewhere, Canadian government bond yields were lower across a more deeply inverted curve, tracking the move in US Treasuries as traders get set for the Federal Open Market Committee minutes. The 10-year eased 2.9 basis points to 3.058%, while it fell 2.3 basis points further below the 2-year rate to a gap of about 88 basis points.

FOMC minutes eyed

Analysts at TD Securities see the minutes shedding light on the FOMC's deliberations regarding the expected downshift in the pace of rate increases. ''With that said, policymakers will also emphasize that the terminal rate is likely edging higher vs prior expectations as the labor market remains overly tight.''