- A combination of factors kept a lid on the early USD/CAD uptick to 1.4065 area.
- The USD remained depressed on softer-than-anticipated US consumer inflation.
- A strong rally in oil prices underpinned the loonie and exerted some pressure.
- The pair seemed to show some resilience and warrant some caution for bears.
The USD/CAD pair traded with a mild negative bias below the 1.40 mark, albeit managed to recover around 15 pips from daily lows post-US macro data.
The pair failed to capitalize on its early uptick to three-day tops, instead met with some fresh supply near the 1.4065 region and was being weighed down by a combination of factors. The US dollar witnessed a modest intraday pullback from two-week tops and remained on the defensive following the release of the latest US consumer inflation figures for April.
According to the data released this Tuesday, the headline US CPI plunged 0.8% MoM in April and the yearly rate decelerated more-than-anticipated to 0.3% from 1.5% previous. Adding to this, core CPI also fell short of expectations and dropped 0.4% during the reported month.
This comes on the back of a fresh leg down in the US Treasury bond yields and speculations that the Fed might be forced to push interest rates below zero. This, in turn, continued taking its toll on the US dollar and did little to ease the intraday bearish pressure.
Meanwhile, a strong rally in crude oil prices underpinned demand for the commodity-linked loonie and further contributed to the pair’s weaker tone. The pullback, however, lacked any strong follow-through selling and thus, warrants some caution before placing fresh bearish bets.
Market participants now look forwards to scheduled speeches by influential FOMC members, which will play a key role in driving the sentiment surrounding the greenback and produce some meaningful trading opportunities.
Technical levels to watch