USD/CAD: Softer Oil, US Dollar rebound tease Loonie buyers ahead of BoC inflation

• USD/CAD renews intraday high while bouncing off one-week low ahead of key Canada data.
• Mixed sentiment, hawkish Fed bets allow US Dollar to pare recent losses.
• WTI crude oil fades bounce off the lowest levels since December 2021.
• BoC CPI appears crucial for Loonie pair buyers ahead of Fed meeting.

USD/CAD picks up bids to refresh daily top around 1.3690, extending the early Asian session bounce off a one-week low heading into Tuesday’s European session. In doing so, the Loonie pair cheers the downbeat price of Canada’s main export earner, namely WTI crude oil, while also justifying the latest recovery of the US Dollar, ahead of the nation’s key inflation data for February.

WTI holds lower ground near the intraday bottom surrounding $67.20 as it retreats towards the 24-month low marked the previous day. Looming fears from the banking sector fallout join the US Dollar rebound in weighing on the black gold prices.

That said, US Dollar Index (DXY) bounces off the lowest levels since early February, marked the previous day, while snapping a three-day downtrend, mildly bid around 103.40 by the press time. In doing so, the greenback’s gauge versus the six major currencies traces the late Monday’s recovery in the US Treasury bond yields, as well as the hawkish Fed bets, to tease buyers.

Although the policymakers’ efforts to tame the banking crisis joined the UBS-Credit Suisse deal to weigh on the US Dollar and previously favored the USD/CAD bears, the market’s indecision about the latest actions to defend the bank depositors seems to challenge the risk-on mood.

It should be noted that the Treasury bond yields remain inactive but keep the previous day’s bounce off multi-day low as the US 10-year and two-year Treasury bond yields recovered from the lowest levels since September 2022 on Monday. Furthermore, CME’s FedWatch tool mentions the probability of witnessing a 0.25% Fed rate hike on Wednesday as near 75%, up from the last week’s 65%.

Against this backdrop, S&P 500 Futures print mild gains to portray cautious optimism even as traders struggle for clear directions.

Moving ahead, the Bank of Canada (BoC) Consumer Price Index (CPI) for February appears the key data for the USD/CAD pair traders to watch amid talks of a policy pivot.

Technical analysis

USD/CAD recovery fails to gain support from the MACD, as the oscillator keeps flashing bearish signals. Also testing the Loonie pair buyers is a seven-day-old descending resistance line near 1.3745.