- USD/CAD retreat, tracking the moves in the US dollar.
- Rising oil prices also restrict the rebound in USD/CAD.
- Focus remains on Powell’s testimony, API crude inventory report.
USD/CAD is seeing some fresh selling in early European trading, retreating from daily highs of 1.2386. The bulls take a breather ahead of Tuesday’s Fed Chair Jerome Powell’s testimony.
The latest leg down in the spot can be attributed to a stalled rebound in the US dollar across the board, as the Fed’s inflation debate picks up pace, driving the last week’s hawkish rhetoric in the back seat.
The upbeat market mood also weighs on the US dollar’s safe-haven demand while the Treasury yields hold firmer on the session.
On the other hand, surging oil prices also threaten the recovery mode in the major. WTI prices hit the highest levels since October 2018 at $73.33, courtesy of the uncertainty over the return of the Iranian oil supply to the market.
All eyes now remain on Powell’s Q&A session during his testimony, as his prepared remarks are already out. Powell once again dismissed inflation as transitory while adding that it should move back toward the central bank’s 2% target once supply imbalances resolve.
USD/CAD: Technical outlook
Given the strong Momentum and the pair’s bounce off the key support zone, USD/CAD may extend the recovery moves toward the immediate hurdle, namely 100-day SMA level of 1.2420. Meanwhile, a downside break of 1.2350-25 support area may seek confirmation around 1.2270 before dragging the quote to the mid-May tops surrounding the 1.2200 mark, FXStreet’s Analyst Anil Panchal notes.
