USD/CAD: Mildly offered near 1.3500 on firmer Oil, sluggish US Dollar, Fed clues, Canada Retail Sales eyed

• USD/CAD sticks to mild losses amid sluggish markets ahead of key events.
• US Dollar struggles to cheer hawkish Fed bets ahead of Powell’s speech.
• WTI crude oil braces for the first weekly gain in five around $72.50 amid market’s cautious optimism.
• US-China fears, concerns about US debt ceiling prod Loonie pair buyers even as Fed versus BoC divergence regains attention.

USD/CAD flirts with the 1.3500 round figure as bulls and bears jostle with the recent easing in the US Dollar versus the WTI crude oil’s rebound amid early Friday morning in Europe. In doing so, the Loonie pair justifies the market’s cautious mood ahead of the key events.

That said, the US Dollar Index (DXY) seesaws at the highest levels in two months amid the headlines suggesting the US House Freedom Caucus’s capacity to block any agreement to raise the $31.4 trillion debt ceiling. The same amplifies the US default woes and prods the DXY buyers of late. Also challenging the optimists is the US-Taiwan trade deal ahead of planned meetings between China's Commerce Minister Wang Wentao and USTR Tai and US Commerce Secretary Gina Raimondo.

On the other hand, the WTI crude oil braces for the first weekly gain in five as it grinds higher to $72.50 at the latest. It’s worth noting that the DXY eyes the second weekly gains but fails to weigh on the energy price amid hopes of more commodity demand due to hopes of no US default, as well as expectations of further easing in China.

Elsewhere, a slump in the market’s bets on the US Federal Reserve (Fed) rate cut in 2023, as well as an increase in the odds of a 0.25% rate hike in June, joined firmer US data and hawkish Fed talks to previously propel the DXY. Additionally favoring the greenback bulls, as well as fueling the USD/CAD, were concerns that the US policymakers will be able to overcome the default fears.

Amid these plays, S&P500 Futures struggle to refresh the yearly top as it prints mild gains near 4,220 after rising to the highest levels since August 2022 the previous day. On the same line, stocks in the Asia-Pacific region trade mixed whereas the US 10-year and two-year Treasury bond yields hesitate in extending the five-day uptrend at the monthly tops.

Moving on, Canada’s March month Retail Sales, expected -1.4% MoM versus -0.2% prior, will precede Fed Chair Jerome Powell’s speech to direct intraday moves of the USD/CAD. However, major attention will be given to US President Joe Biden’s press conference, likely on late Sunday, about the debt ceiling extension.

Technical analysis

USD/CAD remains vulnerable to further downside as the 100-DMA and a two-month-old resistance line restrict short-term upside of the Loonie pair near 1.3510 and 1.3565 in that order.