USD/CAD bears flirt with 1.2300 amid mixed catalysts, quiet markets

• USD/CAD holds lower ground in a 10-pips range after two-day downtrend.
• Traders remain indecisive as WTI pullback jostles with risk-on mood.
• Canadian Retail Sales, US PMIs will be the key to follow.

USD/CAD seesaws in a choppy range above 1.2300, recently easing to 1.2307, amid a quiet Asian session on Wednesday. The Loonie pair dropped for the last two days amid a pullback in the US dollar. Though, the latest consolidation of oil price gains probes the pair sellers amid a lack of direction, as well as mixed sentiment ahead of the second-tier data.

With the Fed policymakers stepping back on the bullish rhetoric, marked last week, fears of tapering and rate hikes wane of late, which in turn improves the market’s risk appetite. While Fed Chairman Jerome Powell matched expectations of citing employment as the reason to keep easy money policy rolling, others from the clan, namely Cleveland Fed President Loretta Mester and New York Fed President John Williams were also against policy adjustments for now. The risk-on mood trimmed the US dollar’s gains and favored commodity-linked currencies like the Canadian dollar (CAD).

However, the pullback in oil prices from the highest since October 2018, mainly backed by concerns of OPEC+ weighing an increase in output and lesser-than-previous inventory draw,  probed USD/CAD sellers of late. It’s worth noting that Tuesday’s mixed economics from the US and the chatters over an extension to the American land border with Canada and Mexico couldn’t offer any strong directives to the quote.

Against this backdrop, Wall Street closed higher and the US Treasury yields dropped, taking the US dollar index (DXY) down before S&P 500 Futures struggled for clear direction.

Amid a lack of major data/events, USD/CAD may remain indecisive ahead of Canada Retail Sales for April, expected -5.0% versus +3.6% prior, as well as the preliminary readings of the US PMIs for June. As scheduled numbers favor mixed outcomes, the quote may have to rely on the risk catalysts and oil moves for fresh impetus.

Technical analysis

Multiple lows marked from early May around 1.2265 can please short-term USD/CAD sellers ahead of testing them with a 50-day SMA level of 1.2224. Meanwhile, March’s low of 1.2365 and 100-day SMA near 1.2415 may entertain buyers before directing them to the recent peak of 1.2487. It’s worth noting that firmer RSI and bullish MACD signals back the pair buyers.