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USD/CAD eyes to regain 1.2700 amid risk-off mood, softer oil prices

  • USD/CAD grinds higher during the first positive day in four around weekly low.
  • WTI crude oil prices weaken the most in eight days amid technical details, OPEC+ verdict.
  • BOC’s Macklem raised doubts over inflation, US data disappointed.
  • Sour sentiment allows USD to pare weekly losses ahead of key central bank meetings, employment data.

USD/CAD pokes intraday high surrounding 1.2685 during the first daily positive performance in a week heading into Thursday’s European session.

The Loonie pair benefits from the USD rebound, as well as cheering a pullback in prices of Canada’s main export item WTI crude oil. Also, mixed comments from Bank of Canada (BOC) Governor Tiff Macklem add to the bullish bias for the pair.

The US Dollar Index (DXY) pierces the 96.00 threshold while extending the previous day’s bounce off a one-week low. In doing so, the greenback track the US Treasury yields that pare weekly losses, also benefiting from the downbeat prints of S&P 500 Futures.

Behind the risk-off mood is the market’s cautious sentiment ahead of the monetary policy meetings by the European Central Bank (ECB) and the Bank of England (BOE). Also weighing on the risk appetite are the inflation fears, recently cited by Fed Nominees from US President Joe Biden and US Treasury Secretary Janet Yellen.

It’s worth noting that the Bank of Canada (BOC) Governor Tiff Macklem said on Monday that there is some uncertainty about how quickly inflation will come down, according to Reuters. However, Macklem added that the bank is confident that inflation will eventually come down, and that the latest GDP data reinforced the view that Q4 2021 growth was strong. 

Elsewhere, WTI crude oil prices dropped 0.60% intraday near $87.00 following the OPEC+ readiness to ease output by 400,000 barrels per day (bpd) per month. Adding to the bearish bias for the US oil benchmark is the Doji candlestick at an eight-year high on the daily chart.

Looking forward, USD/CAD prices are likely to remain firmer amid risk-off mood and may track the USD performance on central bank announcements. That said, US Q4 Nonfarm Productivity and Unit Labor Costs will join the January ISM Services PMI and Factory Orders for December will also offer a busy day to the USD/CAD traders.

Technical analysis

A clear downside break of the two-week-old support line, now resistance around 1.2715, keeps USD/CAD sellers hopeful. That said, a convergence of 21-day and 50-day EMA restricts short-term USD/CAD declines near 1.2660. Adding to the downside filters is the 200-day EMA level surrounding 1.2630.

 

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