USD/CAD eases towards 1.3600 amid steady oil, pullback in US Dollar ahead of PMIs
- USD/CAD consolidates the biggest daily gains in three weeks.
- Global markets stabilize after a volatile day, allowing traders to pare recent moves.
- Oil steadies after reversing from weekly top, US Dollar retreats following the heaviest run-up in 10 weeks.
- US PMIs, second-tier Canadian data eyed for fresh impulse.
USD/CAD takes offers to refresh intraday low around 1.3630 as it pares the previous day’s losses during a sluggish Friday morning.
The Loonie pair rallied the most in three weeks on Thursday amid the broad US Dollar run-up and softer prices of Canada’s key export item, WTI crude oil. However, the absence of major data/events during the early day and the cautious mood ahead of the US activity numbers for December seemed to have triggered the quote’s latest pullback.
US Dollar Index (DXY) rallied the most in 10 weeks as global central banks propelled benchmark rates in the latest monetary policy announcements. Not only that, the policymakers’ readiness to keep the rates higher for longer added strength to the risk-off mood amid recession woes.
While the economic slowdown fears were enough for the WTI crude oil to retreat from the weekly top, the downbeat China data and hopes of resumption of output from the Canadian oil pipeline seemed to have weighed on the black gold prices. That said, WTI crude oil remains steady around $76.30 after snapping a four-day uptrend the previous day.
It should be noted that US President Joe Biden’s crackdown on Chinese chipmakers also weighed on the market sentiment and allowed the US Dollar to stay firmer, while also drowning the Wall Street benchmarks and favoring the US Treasury bond yields.
Moving on, the preliminary readings of the December month PMIs for the US will join the second-tier housing, investments and sales data from Canada to direct short-term USD/CAD moves. Given the latest rush towards risk safety, as well as the hawkish Fed and the absence of Bank of Canada (BOC) hawks, the USD/CAD may witness further advances should the oil price remain depressed.
Technical analysis
A six-week-old resistance line near 1.3665 restricts short-term USD/CAD upside. However, the Loonie pair’s downside appears limited as the monthly support line challenges the bears around 1.3500.