USD/CAD struggles to cheer Oil price slump near 1.3600 as US Dollar retreats ahead of top-tier catalysts

• USD/CAD fades bounce off one-week low after snapping two-day downtrend, sidelined of late.
• WTI crude oil dropped the most in four weeks amid mixed sentiment.
• Mixed US data, month-end consolidation and cautious mood before US Senate’s voting on debt ceiling deal prod US Dollar bulls.
• Canada Q1 GDP, US employment and activity clues should be eyed on calendar.

USD/CAD retreats to 1.3600 during early Wednesday’s Asian session, fading the previous day’s rebound from 1.3567 and easing from 1.3613, as it braces for the key growth numbers from Canada. Also challenging the Loonie pair could be the anxiety ahead of the US Senate voting on the debt ceiling deal. However, a slump in the WTI crude oil price weighs on the quote.

The month-end consolidation and cautious mood ahead of the top-tier data/events gain major attention. Also challenging the greenback could be the mixed US data. With this, US Dollar Index (DXY) rose to the highest levels since mid-March on Tuesday before snapping a five-day uptrend, as well as positing the biggest daily loss since April 19, while closing the North American trading session around 104.05.

On the other hand, WTI crude oil dropped to the lowest levels in four weeks, falling more than 4.0% to print the biggest daily loss since May 02 as it bears the burden of economic fears emanating from uncertainty about the US policymakers’ ability to avoid the looming default. Apart from that, hopes of more Oil output and the US push for using the Strategic Petroleum Reserve (SPR) also exert downside pressure on the black gold price.

On Tuesday, the US Conference Board's (CB) Consumer Confidence Index edged lower to 102.30 for May from an upwardly revised 103.70 prior marked in April (from 101.30). Additional details of the survey report mentioned that the one-year consumer inflation expectations ticked down to 6.1% in May from 6.2% in April. Further, US House Price Index rose 0.6% MoM versus 0.2% expected and 0.7% prior (revised from 0.5%) whereas the S&P/Case-Shiller Home Price Indices dropped to -1.1% YoY in March versus 0.4% prior and -1.6% anticipated. Additionally, the Dallas Fed Manufacturing Business Index for May dropped further to -29.1 from -23.4 and versus -19.6 market expectations.

It should be noted that an improvement in Canada’s Current Account deficit for the first quarter (Q1), to -6.17B versus -9.35B expected and -8.05B prior (revised) also exerts downside pressure on the Loonie pair.

While portraying the mood, Wall Street closed mixed but the US Treasury bond yields remained pressured as US Republicans like Chip Roy and Ralph Norman showed readiness to turn down the US debt ceiling agreement but softer US data put a floor under the risk-off mood. Elsewhere Richmond Fed President Thomas Barkin said that he is seeing evidence that interest rate hikes are curbing demand.

Looking ahead, the US JOLTS Job Openings for April and Canada's Gross Domestic Product (GDP) for Q1 will be crucial for the Loonie pair to watch for clear directions, apart from the risk catalysts mentioned above. Should the Canadian growth number surpasses the downbeat expectations, the Loonie pair may witness fresh downside pressure.

Technical analysis

USD/CAD grinds between a two-month-old descending resistance line and an upward-sloping support line from May 08, respectively near 1.3640 and 1.3570, as oscillators suggest that bulls run out of steam.