USD/CAD dives amid soaring Canadian Dollar, softer USD

The USD/CAD pair made a U-turn after hitting a daily high of 1.3567 due to overall US Dollar weakness, spurred by a risk-on impulse and higher oil prices. Canadian housing started increasing by 22% in April, with total units rising to 261,600.

Data from Canada underpinned the CAD, with Canadian Wholesale Trader Sales dropping to -0.1% and oil prices continuing to extend their gains. On the US front, the New York Empire State Manufacturing Index disappointed investors, falling to -31.3. The NY Fed survey showed that business conditions worsened, the orders index slid, prices increased, and the employment component shrank.

However, the labor market showed signs of easing, suggesting further Fed action could be needed. US President Joe Biden and National Economic Director Lael Brainard discussed the debt ceiling, while two Fed speakers pushed back against cutting rates in 2024. The USD/CAD has retraced and traded below the May 12 daily low of 1.3477, but remains neutrally biased as the 200-day EMA acts as support at around 1.3400.