USD/CAD rebounds to 1.2950 on lower oil, risk aversion ahead of Powell's Fed speech, and BOC inflation data

During Wednesday's Asian session, USD/CAD bulls return to the table following a two-day vacation as the price refreshes its intraday high over 1.2950. In doing so, the Loonie-U.S. dollar pair reflects a higher U.S. dollar with the market's risk-averse mindset anticipating Fed Chair Jerome Powell's speech. The drop in oil prices, Canada's most significant export commodity, helps to the upswing.

With the Fed's aggressiveness and the US recession raising concerns, the US Dollar Index (DXY) achieves its first daily gain of the week at approximately 104.60. Joe Biden, the Vice President of the United States, and Janet Yellen, the US Treasury Secretary, both tried to reassure investors that a recession was not imminent. US economy will not return to past decade of stable growth, employment and inflation, according to Thomas Barkin, president of the Federal Reserve Bank of Richmond, as reported by Reuters.

In contrast, WTI crude oil prices have touched a new monthly low of around $108.00, a fall of 1.5 percent as of press time, as US President Biden argues for reduced energy costs. After U.S. President Joe Biden attempted to lower rising fuel costs by putting pressure on large U.S. firms, oil prices dipped in the early trade of Wednesday, as reported by Reuters. Notable is the fact that Biden plans to suspend the federal gas tax to lower energy prices.

Canadian retail sales rose by 0.9 percent in April, above expectations of 0.8 percent and an earlier upwardly revised 0.2 percent, according to data released on Tuesday. There was a two-year low in the number of annualized existing home sales in the US. Chicago Fed's National Activity Index fell to 0.01 in May from an upwardly revised 0.04 in April, further demonstrating the weakening of the economy.

Ahead of Fed Chair Jerome Powell's key testimony, the USD/CAD is predicted to witness additional gains due to the recent risk-aversion wave that has backed the US dollar's recovery advances and has also favored oil bearish. Important to follow for May is the Bank of Canada's (BOC) Consumer Price Index Core, which is predicted to grow 5.9 percent year-over-year compared to 5.7 percent in April. An rise of 1% is expected in March, up from 0.6% the previous month, according to expectations for the Canadian Consumer Price Index (CPI).

An Examination of the Technical Aspects

Despite the current rebound, purchasers of USD/CAD remain cautious because the quotation has maintained the previous day's break to the downside of an ascending trend line from June 8th. (now 1.3090).