USD/CAD regains 1.3400 amid post-Fed retracement, US Jobless Claims eyed

• USD/CAD keeps recovery moves from 1.3315 despite flashing modest gains on intraday.
• WTI pullback, market’s consolidation of the FOMC-led moves seem to play their roles.
• US PPI, Sino-American tussle and other qualitative catalysts should also be watched for fresh impulse.

USD/CAD carries the late-US session pullback from multi-day low while picking up the bids near 1.3420 during Thursday’s Asian session. The US Federal Reserve’s dovish halt could be cited as an underlying reason for the pair’s earlier declines to the lowest since March 2020. On the contrary, recent weakness in the oil prices, as well as market’s adjustments to the previous heavy flow, might be considered as factors supporting the latest recovery.

US Federal Reserve kept its benchmark Fed rate unchanged during the latest Federal Open Market Committee (FOMC) meeting. Even so, the US central bank struck a dovish tone while cutting the growth and inflation forecasts. It should also be noted that Chairman Jerome Powell’s readiness to use unconventional measures like Yield Curve Control (YCC), if needed in the future, also weighed on the US dollar after the event.

On Thursday, global markets portrayed retracement of the previous day’s Fed-led moves, which in turn kept the USD/CAD pair positive. Also contributing to the quote’s strength could be the weakness in Canada’s main export item oil. WTI oil trims the previous day’s gains while declining to sub-$39.00 mark amid the fresh US-China tension and also following heavy inventory build.

Against this backdrop, the market’s risk-tone sentiment remains sluggish as the US 10-year Treasury yields drop 2.3 basis points to 0.725%. Also highlighting the cautious mood could be Japan’s NIKKEI that drops near 1.0% to 22,890 by the press time.

Looking forward, weekly US Jobless Claims and May month Producer Price Index (PPI) data from the US could decorate the calendar whereas the Sino-American tension might offer background music. Westpac seems to hold an upbeat view of the US data as it said, “After turning sharply negative in April on the back of falling energy costs, the May PPI is expected to recover to 0.1%. Initial jobless claims are also due, and while May nonfarm payrolls beat expectations, last week’s rise in initial and continuing claims points to a slow recovery for the labor market. The median forecast is for a further 1.55 million initial claims and 20 million continuing claims.”

Technical analysis

Unless bouncing back beyond March 09 low near 1.3520, buyers are less likely to enter any fresh positions. Meanwhile, sellers could await a fresh low under 1.3300 for cheering the south run.