- USD/CAD snaps two-day downtrend, grinds higher around daily tops.
- Market’s anxiety ahead of Powell’s testimony joins fears of recession to underpin USD rebound.
- Oil prices also drop as US President Biden pushes for gas tax relief.
- Canada Retail Sales came in firmer, Canada inflation data for May eyed as well.
USD/CAD bulls return to the table after a two-day absence as the quote refreshes intraday top near 1.2950 during Wednesday’s Asian session. In doing so, the Loonie pair traces a firmer US dollar amid the market’s risk-off mood ahead of Fed Chair Jerome Powell’s testimony. Adding to the upside momentum is the fall in oil prices, Canada’s key export item.
US Dollar Index (DXY) prints the week’s first daily gains around 104.60 as sentiment sours amid fears of the Fed’s aggression, as well as concerning the US recession. US President Joe Biden and Treasury Secretary Janet Yellen tried to convince markets that the recession fears aren’t inevitable. Further, Richmond Federal Reserve President Thomas Barkin said that there will be no rapid return for the U.S. economy to the experience of the previous decade of stable growth, jobs and inflation, Reuters reported.
On the other hand, WTI crude oil prices refresh monthly low at around $108.00, down 1.5% by the press time, as US President Biden pushes for lower energy prices. “Oil prices skidded in early trade on Wednesday amid a push by U.S. President Joe Biden to bring down soaring fuel costs, including pressure on major U.S. firms to help ease the pain for drivers during the country's peak summer demand,” said Reuters. It’s worth noting that Biden eyes a pause in the federal gas tax to ease the energy prices.
On Tuesday, Canadian Retail Sales rose the most in three months, by 0.9% in April versus 0.8% forecasts and an upwardly revised 0.2% prior. In the US, Existing Home Sales dropped to the lowest levels in two years when talking the annualized number. Further, the Chicago Fed National Activity Index also dropped to 0.01 in May versus a revised down 0.04 prior.
Given the latest risk-aversion wave underpinning the US dollar’s recovery moves, as well as favoring the oil bears, the USD/CAD is likely to witness further upside ahead of Fed Chair Jerome Powell’s key testimony. Also important to watch is the Bank of Canada’s (BOC) Consumer Price Index Core, expected 5.9% YoY versus 5.7% prior, for May. It’s worth noting that Canada's CPI is likely to rise 1.0% versus 0.6% prior during the stated month.
Technical analysis
USD/CAD buyers remain unconvinced despite the latest rebound as the quote holds onto the previous day’s downside break of an ascending trend line from June 08, around 1.3090 by the press time.
