USD/CAD fades bounce off multi-month low above 1.2100, BOC’s Macklem eyed

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  • USD/CAD retreats from weekly top, refreshes intraday low.
  • Market sentiment dwindles after US inflation unveiled challenges for Fed, US government.
  • WTI trims early-day losses amid geopolitical tension in the Middle East.
  • BOC’s Macklem, US PPI, Jobless Claims can direct short-term moves, risk catalysts be the key.

USD/CAD fizzles corrective pullback, marked the previous day, while dropping back towards the 1.2100 threshold, down 0.10% intraday to 1.2122 during Thursday’s Asian session. In doing so, the Loonie pair consolidates the recent gains amid less active hours joining light macros.

The quote reversed from the early 2017 lows on Wednesday after the US Consumer Price Index (CPI) raised questions about the future monetary policy actions of the US Federal Reserve (Fed) as well as the government’s fiscal stimulus. Following the release of the highest CPI since 2008, a few Fed policymakers tried to placate market bears but failed as CNN broke the news of a leading Democratic economist Larry Summers warning the White House on the ‘overheating’ issue.

Also weighing down the quote could be the recent pick-up in oil prices. WTI trims early Asian losses after escalating Israel-Palestine tussle joined the market’s consolidation amid a light calendar.

Amid these plays, S&P 500 Futures print mild gains but the US dollar index (DXY) keeps the reins near the monthly top.

Looking forward, the US weekly Jobless Claims and Producer Price Index (PPI) will be watched for more clues to the previous day’s challenging inflation figures. It should, however, be noted that Friday’s US Retail Sales and Michigan Consumer Sentiment Index will be the key. Should the incoming US data keeps reflation fears intact, the USD/CAD may portray the much-awaited bounce.

At home, the Bank of Canada (BOC) Governor Tiff Macklem is up for a speech at an online event hosted by the central bank. Although Macklem may not leave his bullish bias behind, inflation fears may help USD/CAD to extend the bounce.

Technical analysis

Failures to cross the 5-day EMA level of 1.2135, not to mention the two-month-old support-turned-resistance line near 1.2230, keep USD/CAD sellers hopeful to meet the 1.2000 psychological magnet.

 

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