USD/CAD rises for the second day in a row and finds support from a variety of sources.
Negative Unrefined petroleum costs subvert the Loonie and go about as a tailwind in the midst of restored USD purchasing.
Now, traders anticipate fresh impetus from the US macro data and the Canadian Q1 GDP print.
The USD/computer aided design pair builds up momentum for the second consecutive day and moves well inside the striking distance of the month to month high during the Asian meeting on Wednesday. The risk-off impulse boosts the safe-haven US Dollar (USD) and serves as a tailwind for the major in the face of expectations that the Federal Reserve (Fed) will keep interest rates higher for longer. In point of fact, the markets are betting on a greater likelihood of another 25 bps lift-off at the upcoming FOMC policy meeting in June. On Friday, the US PCE Price Index data showed that inflation remains sluggish, which increased the bets. The market opinion, in the mean time, stays delicate in the midst of stresses over easing back worldwide financial development, especially in China.
The official Manufacturing PMI fell to a five-month low of 48.8 in May, according to the National Bureau of Statistics (NBS), indicating that factory activity in China decreased faster than anticipated. Moreover, administration area movement extended at the slowest speed in four months and the authority non-fabricating PMI tumbled to 54.5 in May from 56.4 past, adding to the cynicism over easing back fuel interest from top oil merchant China. This, thus, hauls Raw petroleum costs to an almost four-week low, which subverts the product connected Loonie and gives an extra lift to the USD/computer aided design pair. Market participants now anticipate significant macroeconomic releases from the United States and Canada for a fresh boost later in the early North American session.
Wednesday’s monetary agenda includes the arrival of the Canadian Q1 Gross domestic product report, alongside the Chicago PMI and Shocks Employment opportunities information from the US. Aside from this, talks by persuasive FOMC individuals and the more extensive gamble opinion will drive the USD request. In addition, traders will seek out short-term opportunities in the USD/CAD pair by taking cues from the dynamics of the oil price. Despite this, the fundamental background appears to be strongly in favor of bullish traders, enhancing the chances of a further near-term appreciation. As a result, any significant pullback may continue to attract dip-buying at lower levels and is more likely to remain limited prior to the NFP report on Friday, which contains crucial employment details for the US.
Perspectives on the Technical Front
Technically, some follow-through buying above the 1.3650-1.3655 region, or the monthly peak, will be viewed as a new catalyst for bulls and reaffirm the favorable setup. After that, the USD/CAD pair might pick up speed and reclaim the 1.3700 level before rising to the 1.3730-1.3735 resistance zone. The upward trend could continue toward the round figure of 1.3800.
On the other hand, the immediate downside appears to be protected by the 1.3600 level in advance of the overnight swing low around the 1.3565 area. The next significant support is located close to the 100-day Simple Moving Average (SMA), which is currently located close to the 1.3515 region, just ahead of the psychological mark of 1.3500. A convincing break below this level could negate the optimistic outlook and shift the near-term bias in favor of bearish traders, paving the way for a decline toward the 1.3450 region before reaching the 1.3400 round-figure mark.
