The USD/CAD pair is experiencing a consolidation phase in the mid-1.3300s during the early hours of Monday’s Asian session. The Loonie pair had fallen the most in five weeks the previous day, owing to a strong Canada jobs report that joined upbeat prices of WTI crude oil, Canada’s key export. However, WTI crude oil continued to rise, and the Loonie pair is portraying a mixed sentiment ahead of the key US Consumer Price Index (CPI) data.
Canada’s Strong Jobs Report
Canada’s Net Change in Employment grew to 150K in January, far exceeding the expected 15K and the prior 69.2K (revised). Additionally, the Unemployment Rate reprinted 5.0% versus the 5.1% expected, indicating a robust labor market. However, the firmer Canada jobs report makes it challenging for the Bank of Canada (BoC) to pause its rate hike trajectory, as signaled by the dovish comments from BoC Governor Tiff Macklem, which in turn favored USD/CAD bears.
WTI Crude Oil Prices Rise
WTI crude oil refreshed its monthly high to $80.48, amid markets chatters that Russia will cut its Oil output by 500,000 barrels in March to counter European sanctions. This rise in crude oil prices is a positive sign for the Canadian economy, as it is the country’s primary export. However, it is also a factor contributing to the mixed sentiment in the Loonie pair.
US Consumer Sentiment and CPI Data
The preliminary readings of the US University of Michigan (UoM) Consumer Sentiment for February rose to 66.4 versus 65.0 expected and 64.9 prior. However, the year-ahead inflation expectations rebounded to 4.2% this month, from 3.9% in January and 4.4% in December. This could indicate that the US inflation may be on the rise. Furthermore, the US Bureau of Labor Statistics announced on Friday that it revised the monthly Consumer Price Index (CPI) for December to +0.1% from -0.1%, based on updated seasonal adjustment factors. This brings the focus to Tuesday’s US CPI data for January, which could have a significant impact on the Loonie pair.
US-China Tussles and Fed Policy Talks
Recently mixed comments from Richmond Federal Reserve (Fed) President Thomas Barkin and the US-China tussles over the ‘unidentified’ objects seem to challenge the sentiment and favor the US Dollar (USD) due to its haven appeal. Additionally, the traders should pay attention to the risk catalysts ahead of Tuesday’s US CPI, especially due to the policy pivot talks at the Fed.
According to technical analysis, the USD/CAD bears are off the table unless breaking a convergence of the three-month-old ascending trend line and a 200-day Exponential Moving Average (EMA), around 1.3270 by the press time.
In conclusion, the USD/CAD pair is seeing a mixed sentiment with factors such as the strong Canada jobs report, the rise in WTI crude oil prices, and the upcoming US CPI data. While the Loonie pair may consolidate for now, the focus will shift to Tuesday’s US CPI data and the risk catalysts ahead of it. Additionally, technical analysis suggests that USD/CAD bears will remain off the table unless certain support levels are broken.