According to the May FED meeting minutes, the US economy is well strong and can tolerate even more hawkish policies. On the other hand, geopolitical tensions are expected to continue further to add to the USD safe-haven demand and hold the bulls there longer.
Oil and Central banks against the Canadian Dollar.
In Canada, earlier today, we had the retail sales numbers. According to Statistics Canada, Core retail sales increased by 2.4% in March, more than 1.8%, and 20.0%, respectively, in the previous month and market expectation.
These numbers are a bit worrying because of yesterday's inflation data. On the other hand, headline numbers show that Canadian retail sales did not change in March compared with the month earlier, while the market expectation was to see 1.4% growth.
In March, Canadian consumer inflation increased to 6.7%, much higher than the 6.1% forecast and 5.7% advance in February. Also, the 1.4% increase in the monthly scale brought the Consumer Price Index (CPI) to its highest rise since February 1991. This is while Core inflation was twice more than market expectations. According to the Bank of Canada, Core CPI rose 1% in March, bringing the yearly rate to 5.5%, up from 4.8% in February.
Putting together these data shows that in the next meeting of BoC on the first day of Jun, we have to wait for a 50pb rate hike. We have the same expectation from the FED meeting on Jun 14-15. Therefore, since BoC will meet first, we can see some rebound in the Canadian Dollar, but later with the expected 50bp rate hike from FED, the US dollar again will increase and bring back the bulls to the USDCAD chart.
On the other hand, the Canadian Dollar is directly related to the Oil price. We know that Oil was rapidly increasing in the past months, and these levels sound like a peak. WTI prices higher than these levels will be hard to see; therefore, getting more support from the Oil price will be more likely.
Technical indicators in the H1 and H4 charts are moving lower, in line with our fundamental perspective before the FED June meeting. From the technical point of view, we can see the USDCAD trying to regain above the 1.30 level. If the paring can breathe above this level, bulls can continue their way toward higher levels.