USD/CAD slips below 1.2770 ahead of US PMI and Fed Powell speech

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  • USD/CAD is balancing below 1.2800 amid carnage in the DXY.
  • An underperformance is expected from the US PMI figures in all aspects.
  • The Fed’s Powell could dictate a hawkish tone for likely monetary policy action in June.

USD/CAD is gradually declining after facing multiple failed attempts while attacking the round barricade of 1.2800 on Monday. The asset is likely to fall further to the May 5th low at 1.2722 as the US Dollar Index (DXY) eyes a settlement below 102.00 ahead of the US PMI figures (PMI) and Federal Reserve (Fed) Chairman Jerome Powell’s speech on Tuesday.

The DXY extended its losses on Monday after slipping below the crucial support at 102.35. A bearish move of almost 2.80% has been recorded by the DXY since its 19-year high at 105.00. Going forward, investors will remain focused on the US PMI numbers.

The S&P Global Composite PMI is seen at 55.5, lower than the previous print of 56. While the manufacturing and services PMI are expected to land at 57.9 and 55.4 respectively. Market participants are expecting a slight underperformance as higher interest rates signal lower economic activity due to the shortage of market liquidity, which could further weaken the greenback.

Additionally, Fed Chairman Jerome Powell’s speech will remain on investors’ radar. The main discussion could be on the interest rate orientations for the monetary policies ahead, especially in June, which should be very hawkish amid stable inflationary pressures at elevated levels.

On the loonie front, monthly retail sales numbers will be on investors’ radar, which is expected on Thursday. Monthly retail sales are expected to climb sharply to 1.4% from a previous print of 0.1%. However, monthly retail sales excluding auto sales came in at 2%, slightly less than the previous figure of 2.1%.

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