USD/CAD buyers struggle to defend 1.3000 ahead of BOC, US inflation

• USD/CAD extends pullback from intraday low during the first loss-making day in three.
• Oil prices recover from the lowest levels since late February.
• Cautious optimism, battles anxiety ahead of the key data/events to test pair traders.
• BOC is up for 75 bps rate hike, US CPI could increase in June.

USD/CAD picks up bids to consolidate the first daily loss in three around 1.3015 heading into Wednesday’s European session. The Loonie pair’s latest gains could be linked to the market’s cautious mood ahead of the key Bank of Canada (BOC) monetary policy meeting and the US Consumer Price Index (CPI) for June.

It’s worth noting that a rebound in the crude oil prices, Canada’s main export item, fails to underpin the Canadian dollar’s (CAD) strength. That said, WTI crude oil recovered from the lowest levels since late February while snapping a two-day downtrend, up 0.38% intraday near $93.80.

That said, the US Dollar Index (DXY) also remains pressured after easing from the 20-year high, down 0.05% intraday around 108.10 by the press time. The greenback’s gauge versus the major six currencies retreated the previous day amid hopes of no major setback from the US economy, backed by the White House (WH) memo. Also weighing on the quote was softer US data, which in turn eased pressure from the Fed policymakers.

As per Reuters, “The US economic data, including the June jobs report, are not consistent with a recession in the first or second quarters,” the White House said in a memo released on Tuesday. The news contributed to the market’s profit booking moves ahead of the key data/events. Further, the US NFIB Business Optimism Index for June slumped to the lowest since early 2013 while flashing 89.5 figures versus 93.1 prior.

Against this backdrop, S&P 500 Futures and the US 10-year Treasury yields both snap a two-day downtrend. Further, stocks in the Asia-Pacific region also appear to fade the previous bearish bias.

Moving on, the Bank of Canada’s (BOC) Rate Statement and the US CPI, expected to rise to 8.8% YoY from 8.6%, will be crucial for the pair traders to watch for clear directions. While the BOC is widely expected to announce a 0.75% rate hike and drown the USD/CAD prices on positive statements from the central bank. On the other hand, higher expectations from the US inflation benchmark could weigh on the USD in case of any disappointment in the outcome.

Technical analysis

Unless crossing the weekly resistance line, at 1.3045 by the press time, USD/CAD remains vulnerable to witnessing a pullback towards revisiting Friday’s swing low, near 1.2935 at the latest.