USD/CAD slides to 1.3450 on firmer Oil price, focus on BoC, US inflation and Fed Minutes

• USD/CAD prints three-day downtrend amid firmer Oil price, broad US Dollar weakness amid sluggish markets.
• Downbeat Fed signals join cautious optimism elsewhere to weigh on US Dollar.
• Oil price cheers softer greenback, hopes of more energy demand and supply crunch woes.
• BoC is likely to stand pat and may prod Loonie pair sellers but US inflation, FOMC Minutes are the key.

USD/CAD renews its weekly low around 1.3450 as it drops for the third consecutive day during early Wednesday in Europe.

The Loonie pair’s latest gains could be linked to the firmer prices of Canada’s main export item, namely WTI crude oil, as well as broad-based US Dollar weakness, ahead of the key catalysts. Among them, the Bank of Canada's (BoC) Interest Rate Decision, the US Consumer Price Index (CPI) for March and the Minutes of the latest Federal Open Market Committee (FOMC) Monetary Policy Meeting gain major attention.

That said, WTI crude oil clings to mild gains around $81.50 as optimism surrounding China, one of the world’s largest energy users, joins fears supply crunch led by the OPEC+ group. Also fueling the black gold prices could be the geopolitical tension emanating from Russia, China and North Korea.

Elsewhere, the US Dollar Index (DXY) extends the previous day’s losses towards 102.00 as the Federal Reserve (Fed) officials hint at softer inflation and weigh on the market’s bets of the US central bank’s 0.25% rate hike in May. That said, Minneapolis Fed President Neel Kashkari mentioned that he is less optimistic than the bond market on the speed of inflation's fall. However, Philadelphia Fed President Patrick Harker and New York Fed President John Williams previously signaled to ease inflation pressure and weighed on the market’s bets of the Fed’s 0.25% rate hike in May. With this, the CME’s FedWatch Tool suggests a 69.5% chance of the US central bank's hawkish action in the next monetary policy meeting versus 71.2% marked the previous day.

It should be noted that the International Monetary Fund’s (IMF) downward revision to the global growth forecasts and Friday’s upbeat US jobs report, as well as hopes of BoC’s inaction, keeps the USD/CAD buyers hopeful.

Amid these plays, S&P 500 Futures remain directionless around 4,138 after a mixed Wall Street close. Further, the US Treasury bond yields grind higher and prod the US Dollar sellers. That said, the US 10-year and two-year Treasury bond yields grind higher around 3.44% and 4.05% during a four-day and five-day uptrend respectively.

Looking ahead, USD/CAD traders should closely observe the BoC statement as the Canadian central bank has already signaled its hesitance in increasing the benchmark rates. Should the policymakers sound dovish, the Loonie pair may recover faster as the Oil price has recently signaled bullish exhaustion.

Also read: Bank of Canada Preview: Sitting on the sidelines amid looming recession risks

Technical analysis

A daily closing below the eight-month-old ascending support line, near 1.3440 by the press time, becomes necessary for the USD/CAD bears to keep the reins.