USD/CAD slides to fresh monthly lows

The USD/CAD continued to decline during the North American session and recorded a fresh one-month low at 1.2649. the pair is hovering now near the lows, holding onto daily losses, about to post the fourth consecutive decline.

The combination of an improvement in market sentiment, higher crude oil prices and a weaker dollar during Memorial Day, pushed USD/CAD further to the downside ahead of the Canadian Q1 GDP figure on Tuesday. The US dollar continues to correct lower amid easing expectation about Fed’s monetary tightening.

The pair fell under the 200-day Simple Moving Average (1.2660) for the first time since April 22. The short-term outlook remains bearish with technical indicators at oversold territory.

On Tuesday, Canada’s Q1 GDP will be released. The data is expected to confirm a solid start for the economy in 2022. The estimates for Q1 growth are around 5.5% quarter-over-quarter annualized, which would be only a modest slowing from the 6.7% pace of growth in Q4.

With inflation heading higher, the Q1 GDP report will almost certainly leave the BoC to raise its policy rate another 50 bps to 1.50% its monetary policy announcement” on Wednesday. In the United States, the key report will be the official employment report on Friday. Market consensus is for an increase in payrolls of 320K and a decline in the unemployment rate from 7% to 6.9%.