USD/CAD prints three-day downtrend near 1.2700 amid firmer oil, sluggish USD

• USD/CAD renews weekly low during three-day downtrend.
• EU sanctions on Russia challenge oil supplies, underpinning energy prices.
• Fed’s Powell triggered USD weakness by rejecting 75 bps rate hike expectations.
• Second-tier US data, risk catalysts will direct short-term moves ahead of Friday’s jobs report from the US and Canada.

USD/CAD remains pressured around a one-week low, despite being defensive around 1.2700 ahead of Thursday’s European session. In doing so, the Loonie pair stays on the back foot for the third consecutive day as prices of Canada’s key exports, namely WTI crude oil, refreshed its two-week top while the US dollar struggles to overcome the post-Fed losses.

WTI crude oil seesaws around a two-week high, up 0.60% intraday to $108.15 by the press time. The black gold rose the most in three weeks the previous day and extended the gains amid initial Thursday’s trading as geopolitical headlines from the European Union (EU) hint at the supply crunch.

On the other hand, the US Dollar Index (DXY) licks the post-Fed wounds, up 0.13% intraday around 102.65. Even so, the greenback gauge isn’t out of the woods as it struggles to refresh intraday high while trying to reverse the biggest daily loss in two months.

That said, the DXY dropped the previous day as Fed Chair Jerome Powell ruled out a rate hike worth 75 basis points (bps) in upcoming meetings, which was something the market players were expecting. Even so, the Fed matched wide market forecasts by providing 50 basis points (bps) of a rate hike and clues for the Quantitative Tightening (QT) the previous day.

It should be observed that the market sentiment also dwindles of late and helps the oil prices to remain firm. Among the key risk catalysts that recently gained market attention are the US-China tussles as the US Securities and Exchange Commission (SEC) added over 80 Chinese firms to the list of companies facing probable delisting from the US exchanges. On the same line were ongoing covid woes and the European Union’s (EU) sixth round of sanctions on Russia. Against this backdrop, the S& 500 Futures drop 0.12% intraday, snapping a three-day rebound from a yearly low, despite Wall Street’s rally.

Looking forward, the US Jobless Claims, Nonfarm Productivity and Unit Labor Cost details may entertain USD/CAD traders but major attention will be given to the risk catalysts ahead of the key Friday when the Canadian and the US employment data for April will be out.

Read: USD/CAD Weekly Forecast: Is WTI vulnerable?

Technical analysis

A clear break of the previous support line from April 21 and a bear cross of the 21-DMA over the 100-DMA act as strong incentives for sellers. Also supporting USD/CAD bears are the recently easing MACD bullish signals and steady RSI.

That said, the pair’s further downside towards 21-DMA, around 1.2690 by the press time, becomes imminent. Meanwhile, the corrective pullback may initially aim for the 1.2800 threshold before the mid-March top surrounding 1.2875.