USD/CAD bulls take a breather around 1.3600 as Oil steadies after a slump, BOC eyed

• USD/CAD grinds near one-week high after breaking the key hurdles to the north.
• Firmer US data triggered US Dollar run-up but pre-BOC woes test the bulls.
• 50-DMA, previous resistance line from October 13 restricts immediate downside.
• Previous weekly top restricts nearby advances, monthly resistance line adds to the upside filters.

USD/CAD seesaws around a one-week high as bulls flirt with the 1.3600 threshold following a strong run-up to cross the previous key resistances. That said, the Loonie pair’s latest moves appear less lucrative for sellers as the quote stays beyond important resistance-turned-support and the US Dollar bulls are back to the table early Tuesday.

The Loonie pair began the week on the negative side amid the market amid hopes of a faster recovery in China as multiple states from the Dragon nation announced an easing of the Covid-led activity restrictions. However, strong US data raised doubts over the Fed’s easy rate hike trajectory and underpinned the USD/CAD run-up.

Also favoring the quote’s upside moves were the weaker prices of Canada’s key export WTI crude oil. WTI crude oil dropped to a one-week low while marking over 3.5% daily slump for Monday. The energy benchmark’s latest declines could be linked to the strong USD while the Covid hopes and OPEC+ inaction, as well as chatters over the Group of Seven Nations’ (G7) price cap on Russian Oil exports, test the bears.

Elsewhere, Canadian Building Permits recovered in October with -1.4% figure versus -2.0% expected and a revised down -18.2% MoM prior.

On the other hand, US ISM Services PMI rose to 56.5 in November versus 53.1 market forecast and 54.4 previous readings whereas the Factory Orders also registered 1.0% growth compared to 0.7% expected and 0.3% prior. Further, S&P Global Composite PMI improved to 46.4 versus 46.3 initial estimations while the Services counterpart rose to 46.2 compared to 46.1 flash forecasts. On Friday, the US Nonfarm Payrolls (NFP) surprised markets by rising to 263K versus 200K expected and an upwardly revised prior of 284K while the Unemployment Rate matched market forecasts and prior readings of 3.7% for November. Following the upbeat data, Chicago Fed President Charles Evans said, "We are probably going to have a slightly higher peak to Fed policy rate even as we slow pace of rate hikes.”

Amid these plays, Wall Street closed in the red while the US 10-year Treasury yields rose eight basis points to 3.58% by the end of Monday’s North American session.

Looking forward, the market’s cautious mood ahead of the Bank of Canada’s (BOC) monetary policy meeting could restrict immediate USD/CAD moves. However, the dovish hopes from the Canadian central bank challenge the pair sellers despite hopes of 0.50% rate increase.

Technical analysis

Among the key immediate supports, the 50-DMA level surrounding 1.3570 could gain the intraday seller’s attention before the previous resistance line from October 13, close to 1.3535 at the latest.

In a case where the USD/CAD price drops below 1.3535, the odds of witnessing a slump to the 21-DMA support near 1.3415 can’t be ruled out.

Even so, the 100-DMA level around 1.3300 will be a tough nut to crack for the USD/CAD bears before taking control.

Alternatively, last week’s top of 1.3645 restricts the nearby upside of the USD/CAD pair before directing the buyers towards a one-month-old upward-sloping trend line, close to 1.3675 by the press time.

USD/CAD: Daily chart

Trend: Further upside expected