USD/CAD slips below 1.3600 amid WTI rise, risk reset
- USD/CAD snaps two-day winning to take a U-turn from 1.3617.
- WTI confirms a bullish chart pattern while probing the weekly top.
- Canadian FinMin rules out tax increase to bear the burden of aid programs.
- Canada Retail Sales, Fedspeak and risk catalysts to offer fresh impulse.
USD/CAD drops to 1.3592 while extending its retreat from 1.3617 during the early Asian session on Friday. In doing so, the pair differs from the last two-day increase. However, the bears are struggling amid a quiet session.
The pair’s latest moves could be attributed to oil prices run-up and positive comments from the Canadian Finance Minister Bill Morneau. WTI crude oil recently confirmed a bullish chart pattern and is attacking the weekly high around $39.30. On the other hand, Canadian diplomats poured cold water on the face of expectations that the government will increase taxes to get the leeway from heavy aid programs to combat the coronavirus (COVID-19).
It should also be noted that the market’s risk-tone sentiment also recovers from the previous pessimism. The reason could be spotted from the US and Chinese diplomats to keep the trade talks on the table despite jostling over political issues. While portraying the mood, S&P 500 Futures print 0.33% gains to 3,108 by the press time.
Even so, the fears of the fresh virus wave can’t be ruled out as numbers from the southern US states, like Florida and Texas, keep on increasing. Also likely to weigh the risks could be the geopolitical tension in Asia and doubts over the further reopening of the economies.
Looking forward, Canada’s April month Retail Sales, expected -15.1% versus -10.0% prior, could renew the pair’s upside momentum. However, comments from the Federal Reserve Chairman Jerome Powell, Dallas Fed President Loretta Mester and the policymaker Randal Keith Quarles will be the key to watch. Joining all these catalysts will be the risk factors relating to the virus and the US-China issue.
Technical analysis
A monthly falling trend line, currently around 1.3600, guards the pair’s immediate upside, a break of which could challenge the weekly top near 1.3685/90. On the downside, 1.3500 and 1.3360 might entertain the sellers during further weakness.