USD/CAD sellers attack 1.2900 on firmer oil, DXY pullback
- USD/CAD stays pressured after reversing from 18-month high the previous day.
- WTI crude oil approaches monthly high amid firmer sentiment, fears of EU oil embargo on Russian energy imports.
- US data, risk-on mood favored sellers ahead of more inflation-linked data.
USD/CAD flirts with the 1.2900 key support, following a pullback multi-month high, during the initial hours of Monday’s Asian session. In doing so, the Loonie pair justifies firmer prices of Canada’s key export item, WTI crude oil, as well as softer US Dollar Index (DXY), with eyes on risk catalysts.
The quote dropped the most since late August 2021 the previous day after the market’s risk-on mood weighed on the US dollar while firmer prices of oil exerted additional downside pressure on the USD/CAD prices.
That said, WTI crude oil prints a four-day uptrend as it approaches the monthly high surrounding $110.00. A pause in the US dollar’s north-run joins fears emanating from Europe, over Russian oil imports, propelling the black gold prices of late.
The US dollar’s weakness could be linked to the decade-low prints of the US Michigan Consumer Sentiment Index for May, to 59.1. Also challenging the greenback buyers were comments from Fed Chairman Jerome Powell who repeated calls for 50 bps rate hikes in the next two meetings. It should be observed that the recent hopes of overcoming the covid resurgence in China also underpin the firmer sentiment and weigh on USD/CAD prices.
Against this backdrop, Wall Street benchmarks portrayed the biggest daily gains in over a week whereas the US Treasury yields also recovered. The risk-on mood weighed on the US Dollar Index (DXY) by dragging it from the 20-year high. That said, S&P 500 Futures print 0.45% intraday gains by the press time.
Moving on, China’s April month figures for Retail Sales and Industrial Production may offer immediate direction to USD/CAD prices, due to direct linkages with oil, but major attention will be given to US Retail Sales and Canada Consumer Price Index (CPI) figures for a clear view.
Also read: USD/CAD Weekly Forecast: The rarefied air above 1.3000
Technical analysis
A three-week-old ascending support line and March’s monthly high challenge USD/CAD bears around the 1.2900 threshold.
Author
Anil Panchal
FXStreet
Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.
