USD/CAD steadies below 1.3500 on sluggish Oil price, Canada inflation, US debt ceiling talks eyed

• USD/CAD licks its wounds after positing the biggest daily loss in a week.
• WTI crude oil struggles to cheer US SPR news, supply crunch fears amid downbeat EIA report.
• US Dollar remains pressured on softer data, mixed Fedspeak and fears of US default.
• BoC CPI, US Retail Sales will decorate calendar, US debt ceiling negotiations are the key for Loonie pair traders.

USD/CAD treads water around 1.3470 heading into Tuesday’s European session, following a downbeat start of the week. In doing so, the Loonie pair aptly portrays the trader’s cautious mood ahead of top-tier US and Canadian data/events amid mixed sentiment.

Given the mixed views surrounding the US policymakers’ readiness to avoid the debt ceiling expiration, global markets turn cautious as President Joe Biden and House Speaker Kevin McCarthy brace for the key negotiations scheduled at 19:00 GMT. That said, the latest comments from US House Speaker McCarthy saying, “I don’t think we’re in a good place,” seem to put a floor under the US Dollar price, via fears of deadlock on the US debt ceiling extension as Republicans may stick to their demand.

It should be noted that the US Dollar Index (DXY) drops to 102.40 as it keeps the week-start pullback from the monthly high. On the other hand, WTI crude oil retreats from the intraday high to $71.40 by the press time amid mixed clues from the US Energy Information Administration’s (EIA) latest Oil report, the US readiness to refill the Strategic Petroleum Reserve (SPR) and fears of supply crunch due to wildfire in Canada’s Alberta, one of the key global Oil producers.

Elsewhere, downbeat US data and firmer Canadian statistics joined upbeat Crude oil price to underpin the USD/CAD pair’s biggest daily slump in over a week the previous day.

On Monday, NY Empire State Manufacturing Index marked the biggest fall since April 2020, to -31.8 for May, whereas Canada’s Housing Starts for April and Wholesale Sales for March rose past market forecasts and priors.

While portraying the market sentiment, S&P 500 Futures print mild losses even as Wall Street closed positive and the yields remain pressured, which in turn shows the market’s indecision and awaits the important data/events for clear directions.

Moving on, Canada’s Consumer Price Index (CPI) and the Bank of Canada (BoC) CPI Core for April, together with the US Retail Sales for the said month, will be the key data to watch for the USD/CAD pair traders for clear directions. Above all, the Loonie pair traders should keep their eyes on how the US policymakers tackle the default fears for a better guide.

Technical analysis

USD/CAD reversed from the 50-DMA the previous day to snap a two-day uptrend. The pair’s following declines, however, failed to gain support from the MACD and hence the Loonie pair struggles near the 200-DMA support near 1.3465-60 by the press time.