USD/CAD renews daily lows at 1.2760 as DXY loses strength, oil moves higher

• USD/CAD tumbles below 1.2800 as oil heads north on supply concerns.
• The DXY is witnessing a mild correction after a juggernaut upside move.
• A vote from Germany in favor of the embargo on Russian oil has bolstered the happing of the event.

The USD/CAD pair is moving sharply lower in the Asian sessions as the US dollar index (DXY) loses upside momentum and oil prices surge on renewed supply concerns. The asset witnessed a bearish open test-drive move on Friday. After a minor bounce at open, the pair attracted offers at 1.2813 and displayed a south-sided move to a low of 1.2758.

The DXY is witnessing a minor correction after printing a fresh 19-year high at 103.93 however, the market participants should not consider the minute pullback as a reversal as the tailwinds of a jumbo rate hike by the Federal Reserve (Fed) has not changed.  The uncertainty over the interest rate decision announcement by the Fed next week will continue to loom over the Fx domain. As per the market consensus, an interest rate elevation by 50 basis points (bps) looks certain but investors will also focus on the dictations for balance sheet reduction and a roadmap for returning interest rates to neutral rates.

Meanwhile, oil prices are heading north as renewed supply concerns amid progressive footprints of the European Union (EU) towards an embargo on Russian oil. The expectations of a European embargo got bolstered after Germany surrendered its opposition to the prohibition of Russian oil imports. Germany would have found alternatives for its abundant oil and energy demand now but shifting to a new exporter would need significant blood and sweat. Higher oil prices have also underpinned the loonie against the greenback. It is worth noting that Canada is the biggest exporter of oil to the US.