USD/CAD steadies around 1.3000 despite softer oil, recession woes, focus on BOC

  • USD/CAD bulls take a breath after posting the biggest daily jump in a week.
  • Oil prices remain pressured amid hopes of more output, recession fears.
  • US dollar cheers market’s rush to risk-safety ahead of Wednesday’s key inflation data.
  • BOC is up for a heavy rate hike in its fourth consecutive hawkish move.

USD/CAD seesaws around 1.3000 psychological magnet after rising the most in a week as buyers struggle for fresh directions during Tuesday’s Asian session. The Loonie pair portrayed the broad risk-off mood, as well as softer oil prices, to begin the key week comprising the US inflation data, as well as the Bank of Canada (BOC) monetary policy meeting.

A jump in the US inflation expectations and comments from the US policymakers suggesting more pain ahead escalated the fears of economic slowdown, which in turn propelled the market’s rush towards risk safety. Also adding to the risk-off mood, as well as to the broad US dollar strength, were Friday’s upbeat US employment data and geopolitical/trade fears. It should be noted that the weakness in the oil prices, amid recession woes and expectations of higher output, offers extra support to the USD/CAD bulls, due to Canada’s reliance on crude oil export.

That said, one-year US inflation expectations jumped to the record high of 6.8% in June, versus 6.6% prior, per the NY Fed’s survey of one-year-ahead consumer inflation expectations. The inflation expectations followed strong US employment data, published Friday, to underpin hopes of an aggressive Fed rate hike and fueled concerns over the health of the US economy, as well as the global ones. That said, the latest US jobs report mentioned that the US Nonfarm Payrolls (NFP) rose by 372K for June, versus expected 268K and downward revised 384K prior.

On a different page, White House Press Secretary Karine Jean-Pierre told reporters that she expects new Consumer Price Index (CPI) data to be highly elevated. Further, Atlanta Fed President Raphael Bostic said that recent inflation data has not been as encouraging as I would have liked, per Reuters.

Elsewhere, WTI crude oil keeps the week-start losses around $100.30, down 0.80% intraday, as fears of softer demand due to the global economic slowdown fears join the chatters that US President Joe Biden will push for greater oil output during his trip to the Middle East, starting from Tuesday.

Amid these plays, equities and were lower while the S&P 500 Futures remains directionless by the press time.

Moving on, risk catalysts could be of importance to the USD/CAD traders amid a light calendar at home. However, major attention will be given to Wednesday’s BOC meeting as the Canadian central bank is up for a heavy rate hike of 0.75% during its fourth attempt to tame inflation.

Technical analysis

USD/CAD struggles for clear directions between a two-month-old resistance line and an upward sloping support line from June 08, respectively around 1.3085 and 1.2925. That said, RSI (14) hints at a gradually rising bullish bias.

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