- USD/CAD initiates 2-day downtrend, climbs higher around daily highs.
- Market anxiety ahead of Powell’s testimony joins recession fears to support USD rebound.
- Oil prices are also falling as US President Biden pushes for gas tax relief.
- Canadian retail sales were firmer, Canadian inflation data for May as well.
USD/CAD bulls return to the table after a two-day absence as the quote refreshes the intraday high near 1.2950 during Wednesday’s Asian session. In doing so, the Loonie pair charts a firmer US Dollar amid the market‘s risky mood ahead of testimony from Fed Chairman Jerome Powell. Falling oil prices, Canada’s main export, add to the bullish momentum.
The US Dollar Index (DXY) posted the week’s first daily gains around 104.60 as sentiment deteriorated amid fears of Fed aggression, as well as the US recession. US President Joe Biden and Treasury Secretary Janet Yellen tried to convince markets that recession fears were not inevitable. Additionally, Richmond Federal Reserve Chairman Thomas Barkin said there will be no quick return for the U.S. economy to the previous decade’s experience of stable growth, jobs and economic growth. inflation, Reuters reported.
Elsewhere, WTI crude oil prices are refreshing their monthly low at around $108.00, down 1.5% at press time, as US President Biden pushes for a price drop of energy. Oil prices slipped in early trading on Wednesday amid a push by US President Joe Biden to reduce soaring fuel costs, including pressure on big US companies to help ease the pain of drivers during peak in the country’s summer demand,” Reuters said. It should be noted that Biden is considering a pause in the federal gasoline tax to ease energy prices.
On Tuesday, retail sales in Canada rose the most in three months, rising 0.9% in April versus 0.8% forecast and an upward revision of 0.2% previously. In the United States, existing home sales fell to the lowest levels in two years when looking at the annualized number. Additionally, the Chicago Fed National Activity Index also fell to 0.01 in May from a downward revision of 0.04 previously.
Given the latest wave of risk aversion supporting US Dollar rally moves, as well as favoring oil bears, USD/CAD is likely to see further upside ahead of key testimony from Fed Chair Jerome Powell. Also important to watch is the Bank of Canada Consumer Price Index (BOC) core, expected at 5.9% YoY vs. 5.7% previously, for May. Of note, Canada’s CPI is expected to rise 1.0% vs. 0.6% previously in the indicated month.
USD/CAD buyers remain skeptical despite the latest rally as the quote clings to the previous day’s downside breakout of an ascending trendline from June 8, around 1.3090 at the time we put to press.