USD/CAD stays depressed below 1.2900 as oil rebounds, focus on Fed’s Powell

• USD/CAD renews intraday low during a sluggish session after three-day downtrend.
• Oil prices pare the first daily losses in four amid geopolitical, supply concerns.
• ECB Forum will be crucial as Fed’s Powell repeatedly fails to impress USD bulls in the recent past.

USD/CAD holds onto the recent bearish bias, despite showing inaction of late, as it refreshes intraday low near 1.2860 heading into Wednesday’s European session.

The Loonie pair’s latest weakness could be linked to the firmer prices of Canada’s main export item, namely the WTI crude oil. However, the market’s anxiety ahead of important monetary policy discussions among the central bankers from the US, the UK and the European Union (EU) at the ECB Forum seems to challenge the USD/CAD bears of late.

That said, WTI crude oil recently bounced off its intraday low to $110.00. In doing so, the black gold consolidates the first daily loss in four as global ire towards Russian oil joins supply crunch fears in the Middle East.

Elsewhere, S&P 500 Futures print mild gains as the US 10-year Treasury yields extend the previous day’s losses amid recession fears. That said, the benchmark US bond coupons drop to 3.13%, down 7.7 basis points (bps) by the press time.

On Tuesday, a jump in the one-year US consumer inflation expectations joined hawkish Fed bets to renew the US dollar’s safe-haven demand. The US Conference Board (CB) Consumer Confidence Index dropped for the second consecutive month in June, to 98.7 versus 100.0 expected and 103.2 in May. In doing so, the widely followed consumer sentiment gauge dropped to the lowest level since February 2021. Further details revealed that the one-year consumer inflation rate expectations climbed to 8% from May's revised print of 7.5. It should be noted that the US trade deficit dropped to the lowest in a year, to $104.3 billion, per the latest release for May.

Moving on, the US Core Personal Consumption Expenditure (PCE) for Q1 2022, expected to remain unchanged at 5.1%, will join the final readings of the US Q1 GDP, likely to confirm a 1.5% Annualized contraction, to highlight additional catalysts for clear directions. However, major attention will be given to how Fed Chair Powell defends the biggest rate hike since 1994 and manages to signal more such measures to tame inflation. The Fed Boss has recently failed to please USD bulls and hence any surprises should be traded with a pinch of salt.

Technical analysis

Unless bouncing back beyond June 21 swing low near 1.2900, USD/CAD remains vulnerable to retesting the 50-DMA support of 1.2820.