USD/CAD skids to near 1.2800, Fed focuses on price stability, Canada Inflation eyed

• USD/CAD is expecting more downside as DXY weakens significantly on a positive market mood.
• The Fed will keep a restricted policy until inflation comes down drastically.
• Canada’s annual CPI figure is seen unchanged at 6.7%

The USD/CAD pair is scaling lower after sensing rejection from its crucial resistance of 1.2850. The asset is oscillating around Tuesday’s low at 1.2807 and is expected to extend its losses after violating the same. A sheer downside move in the major after failing to sustain above the psychological support of 1.3000 intensified selling pressures, which resulted in a three-day losing streak.

A firmer rebound in the risk-on impulse has brought weakness in the US dollar index (DXY)’s safe-haven appeal. The DXY has tumbled to near 103.30 despite higher-than-expected US Retail Sales. The US Census Bureau reported the Retail Sales at 0.9%, higher than the consensus of 0.7%. The rebound in the positive market sentiment is so strong this time that a bearish reversal in the DXY looks likely. The DXY has eased more than 1.5% in the last three trading sessions after hitting a 19-year high of 105.00 last week.

Meanwhile, Federal Reserve (Fed) chair Jerome Powell in his Q&A with Wall Street Journal has emphasized on bring price stability to the economy. The Fed will continue with its tightening policy until the inflation drops in a convincing way.

On the loonie front, investors are focusing on the release of the Consumer Price Index (CPI) numbers. The core annual inflation figure that excludes food and energy is seen at 5.4%, a little lower than the prior print of 5.5%. While the wholesome annual figure is expected to remain stable at 6.7%. This will keep the odds of one more rate hike by the Bank of Canada (BOC) intact.