USD/CAD retreats as oil stabilizes near $106.50

The USD/CAD pair meets sellers around 1.2900, retreating from the previous day’s recovery moves from a two-week low, as traders take a breather from the latest risk-aversion amid a sluggish start to the Asian session. That said, the Canadian dollar pair takes offers to renew intraday low around 1.2875 by the press time.

Fears of a slowdown in the US GDP growth and the Fed officials favouring only 50 basis points of rate hikes for the next two meetings seem to have underpinned the latest consolidation in the market moves. The apparent lack of major catalysts could also be connected to the recent moves, particularly after the retreat from risk assets the previous day.

Wall Street benchmarks stayed in the red territory while the US 10-year Treasury yields dropped 11 basis points (bps) to 2.88% by the end of Wednesday’s US trading session.

Higher inflation numbers from the Canada, UK, and the Eurozone stirred concerns of slowing down growth and propelled risk-aversion on Wednesday. Canada’s CPI could not reject the USD/CAD bulls despite printing better-than-expected data of 6.8% YoY for April.

Not only has sour sentiment fueled the US dollar but also weighed on WTI crude oil, Canada’s key exports, offering a double whammy of attacks on the Canadian Dollar. Also contributing to the oil price weakness are additional concerns of demand slowdown, especially emanating from China due to the covid spread and fresh lockdown in Tianjin, the port city near Beijing.

The USD/CAD traders may now keep their eyes on the risk catalysts for fresh impetus ahead of the second-tier data relating to housing and manufacturing from the US and Canada. Above all, clues over the firming of inflation fears will be crucial to watch.
Technically; failure to provide a daily closing beyond the 10-day EMA, around 1.2890 at the latest, joins the pair’s sustained trading below the previous support line from April 21, close to 1.2965, to keep USD/CAD bears hopeful of meeting the monthly low near 1.2715.