USD/CAD: Sluggish Oil price checks bears below 1.3300, US inflation, BoC in focus

• USD/CAD fades bounce off 1.3265-70 support zone even as Oil price retreats from five-week high.
• US inflation expectations, job numbers contrast with upbeat Canada employment data to weigh on Loonie pair.
• BoC is expected to raise interest rates, softer US CPI will favor pair sellers unless Oil price drops further.
• Second-tier data, risk catalysts can entertain intraday traders.

USD/CAD bears keep the reins around 1.3275, despite a defensive start to the key week, as market players seek fresh clues amid early Tuesday in Asia. In doing so, the Loonie pair justifies the latest weakness in the Oil price, Canada’s main export item, while probing the hawkish bias of the Bank of Canada (BoC).

WTI crude oil remains mildly offered near $73.10 while keeping the previous day’s U-turn from a five-week high. In doing so, the black gold takes clues from the downbeat China inflation figures even as supply cuts from Saudi Arabia and Russia join hopes of more oil demand from the US.

Even so, the mostly upbeat Canadian job numbers reaffirmed expectations that the Bank of Canada will raise interest rates by 25 basis points at next week's meeting. On the contrary, disappointing US jobs report and inflation expectations weigh on the US Dollar.

On Friday, Canada’s Net Change in Employment jumped by 59.9K in June versus 20.0K expected and -17.3K prior but the Average Hourly Wages eased and the Unemployment Rate rose during the said month. Further, the Ivey Purchasing Managers Index also eased on a seasonally adjusted basis to 50.2 for June versus 51.5 expected and 53.5 prior.

On the other hand, the headline US Nonfarm Payrolls (NFP) marked the first below-expectations print in 15 months while falling to 209K, versus 225K market forecasts and 309K prior (revised), whereas the Unemployment Rate matches analysts’ estimations of 3.6% compared to 3.7% prior.

That said, the Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation dropped to the lowest level since April 2021 at 3.8% in June from 4.1% in May.

It’s worth noting, however, that the Fed policymakers remain hawkish and prod the USD/CAD bears. Recently, San Francisco Fed President Mary Daly said, "We're likely to need a couple more rate hikes over the course of this year to really bring inflation sustainably back to the Fed's 2% goal." On the same line, Cleveland Fed President Loretta Mester also said that the Fed will need to tighten the monetary policy "somewhat further" to lower inflation. Furthermore, Federal Reserve Vice Chair for Supervision Michael Barr said, "We are quite attentive to bringing inflation down to target." 

Amid these plays, the market sentiment improves and stops the USD/CAD recovery amid the hawkish BoC expectations, especially amid the downbeat US Dollar. While portraying the mood, S&P500 Futures trace upbeat Wall Street performance while the US Treasury bond yields remain pressured.

Moving on, a light calendar may restrict the immediate USD/CAD moves ahead of the all-important US inflation and BoC Interest Rate Decision, scheduled for release on Wednesday.

Technical analysis

A clear downside break of a fortnight-old ascending support line, now immediate resistance near 1.3290, directs USD/CAD bears toward the 21-DMA support of 1.3240.