• USD/CAD has sensed stiff barricades around 1.3350 as the USD Index has witnessed exhaustion in the upside momentum.
• Optimism inspired by a skip in the rate-hiking spree by the Fed was offset by caution generated due to hawkish interest rate guidance.
• The Canadian Dollar is going to show some action after the release of monthly Manufacturing Sales data.

The USD/CAD pair has sensed offers near the immediate resistance of 1.3350 in the early European session. The Loonie asset is losing strength despite more interest rate hikes by the Federal Reserve (Fed) will keep the policy divergence space of the US central bank with other global banks.

Nominal losses added in Asia by the S&P500 futures have been carry-forwarded in Europe as optimism inspired by a skip in the rate-hiking spree by the Fed has been offset by caution generated due to hawkish interest rate guidance.

Earlier, the US Dollar Index (DXY) pared its entire losses and climbed above 103.30 as Fed chair Jerome Powell confirmed that more interest rate hikes are in motion but is now struggling to maintain strength. Investors should note that United States headline inflation has critically softened, but core inflation is still showing persistence due to tight labor market conditions.

Fed Powell cited in his monetary policy statement that "Not seeing a lot of progress on core PCE inflation." And "Want to see core PCE moving down decisively."

The hawkish dot plot by the Fed has impacted the demand for US government bonds. This has led to a sharp jump in the 10-year US Treasury yields to near 3.83%.

The Canadian Dollar is going to show some action after the release of Canada’s monthly Manufacturing Sales data (April). A contraction of 0.2% is expected in the economic data vs. an expansion of 0.7%. It looks like higher interest rates by the Bank of Canada (BoC) have forced firms to underutilize their entire capacity, which has reduced the overall factory activity.

On the oil front, oil prices have shown a recovery move after a correction to near $68.00 as the USD Index has met offers. It is worth noting that Canada is the leading exporter of oil to the US and higher oil prices would strengthen the Canadian Dollar.