USD/CAD eyes to regain 1.2700 on softer oil, firmer US dollar

• USD/CAD refreshes intraday high, bounces off 18-day low.
• US dollar stays firmer even as market sentiment improves.
• Oil prices struggle amid supply-demand fears ahead of OPEC+ meeting.
• Off in multiple markets, lack of major data challenges short-term moves.

USD/CAD picks up bids to refresh intraday high near 1.2670 during Monday’s Asian session. In doing so, the Loonie pair snaps a three-day downtrend while bouncing off the lowest level since December 08, flashed the previous day.

The recent pullback in Canada’s key export item, namely WTI crude oil, joins the US dollar rebound to recall the USD/CAD bulls. However, an absence of major data/events and mixed clues concerning the South African covid variant, namely Omicron, challenge the recovery moves.

That said, WTI crude oil pares intraday gains around $75.30 amid fears of a reduction in the global energy demand even as Reuters cites OPEC+ report suggesting mild and the short-lived impact of Omicron.

Read: WTI bulls eye $76.00 as OPEC+ sees mild, short-lived impact of Omicron on oil market

Elsewhere, the S&P 500 Futures rise 0.40% intraday but the bonds are inactive amid an off in Japan. Further, the US Dollar Index (DXY) consolidates near the lowest level in over a month, up 0.24% intraday by the press time.

While portraying the covid data, Reuters said, “Worldwide infections hit a record high over the past seven-day period, with an average of just over a million cases detected a day between Dec. 24 and 30.” The news also mentioned, “Over 4,000 flights were canceled around the world on Sunday, more than half of them were the US flights, adding to the toll of holiday week travel disruptions due to adverse weather and the surge in COVID-19 cases.”

On the same line were comments from Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, per CNN stating, “When you have so many, many cases, even if the rate of hospitalization is lower with Omicron than it is with Delta, there's still the danger that you're going to have a surging of hospitalizations that might stress the health care system.”

Moving on, the monthly employment data from the US and Canada becomes crucial for USD/CAD traders while today’s final readings of the US Markit Manufacturing PMI for December may offer immediate clues.

Technical analysis

Although the 100-DMA level of 1.2628 puts a floor under the USD/CAD downside, the pair buyers remain cautious until the quote stays below the previous support line from October, around 1.2780.