USD/CAD retests 1.3800 as Oil tumbles on banking sector concerns

• Credit Suisse-led oil weakness sent USD/CAD to the 1.3800 level.
• WTI dips below the $70 mark as financial turmoil weighs on risk assets.
• Rumor around some emergency meetings among central banks.

USD/CAD took a wild ride on Wednesday due to oil weakness. The pair touched the 1.3800 resistance as renewed price pressure affected oil prices. It all started with some floating rumors about Credit Suisse bank, which was perceived as a contagion effect following Silicon Valley Bank's (SVB) fallout. There were some threats attributed to Credit Suisse that might have been tangled up with SVB's financial crisis and could be the next liquidity victim, although all allegations have been denied by Credit Suisse's CEO. Later on, the Swiss banking regulator intervened and committed to providing liquidity solutions if required.

The aforementioned situation triggered a fresh wave of sell-offs among risky assets, and oil prices were affected the most. West Texas Intermediate (WTI) price fell below the $70 mark as panic was triggered among investors. The falling oil prices have been signaling "something to break" on surging borrowing costs since cracks began to appear in financial systems.

A corrective downturn in oil prices that started earlier this week has weakened the Canadian Dollar and given a boost to USD/CAD. Although falling US Treasury yields are keeping a lid on any appreciation in the US Dollar, the pair is mainly driven by oil prices rather than anything else. Since the Bank of Canada took a pause on the rate hiking cycle, USD/CAD is more likely to be driven by either US Dollar dynamics or oil's story.

Meanwhile, the US released its Retail Sales figures and Producer Price Index (PPI) data for February on Wednesday. The Retail Sales came in at a relatively massive downbeat; the MoM came in at -0.4% from the previous 3.2%, and the Control Group came in at 0.5% from the previous 2.3%. The PPI data showed some relief signs: the MoM reading came in at -0.1% from the prior 0.3%, and the YoY reading came in at 4.6% from the prior 5.7%.

Levels to watch