USD/CAD pares biggest daily loss in a month below 1.2700 amid softer oil prices

• USD/CAD registers another bounce off 50-day EMA to consolidate recent losses.
• Firmer yields, DXY underpin corrective pullback as oil buyers take a breather.
• Headlines concerning Russia, China and Canadian politics may entertain intraday traders ahead of US, Canada trade numbers.

USD/CAD licks its wounds around 1.2675 during the mid-Asian session on Tuesday, following the heaviest daily fall in four weeks.

Cautious optimism in the market joins pullback in prices of Canada’s main export item WTI crude oil to underpin the latest rebound. However, mixed concerns and cautious sentiment ahead of the December month trade numbers from the US and Canada seem to test the Loonie pair’s corrective pullback of late.

That said, WTI crude oil prices extend the previous day’s pullback from a multi-day high, down 0.4% intraday around $90.00 by the press time. In doing so, the black gold seems to justify the recent pause in the US Treasury yields, after easing from a two-year top on Monday. Also challenging the oil traders are the Sino-American trade tussles and recently downbeat China data. It should be noted, however, that the risk of a Russia-Ukraine war and fears of the OPEC+ members’ inability to meet production hike targets keep the energy buyers hopeful.

Elsewhere, truckers’ protests in Canada and US-China trade tussles also seem to help the USD/CAD buyers amid a sluggish Asian session.

Against this backdrop, the US 10-year Treasury yields rose 1.6 basis points to 1.93%, close to the highest levels since late 2020, while the US stock future print mild gains around 4,485 at the latest. That said, the benchmark US T-bond coupons eased from a two-year high the previous day while Wall Street marked sluggish closing. Additionally, stocks in the Asia-Pacific region also grind higher to portray slightly positive market sentiment.

Looking forward, the US Goods and Services Trade Balance for December, expected $-83B versus $-80.2B, will precede Canada’s International Merchandise Trade for the stated month, expected $2.62B against $3.13B, to entertain intraday traders of the USD/CAD pair. However, major attention will be given to the risk catalysts and Thursday’s US Consumer Price Index for January.

Technical analysis

Sustained trading beyond the 50-day EMA, around 1.2665 by the press time, keeps USD/CAD buyers hopeful to mark another battle with the six-week-old resistance line near 1.2785.