USDCAD retreats towards 100-DMA despite softer oil prices, US Retail Sales, Canada inflation eyed

• USDCAD fades bounce off 100-DMA, mildly offered of late.
• Improvement in market sentiment pushes back US Dollar buyers.
• Fears of softer demand weigh on oil prices ahead of EIA inventories.
• Risk catalysts should also be watched closely amid the recent swings in risk appetite.

USDCAD struggles to defend buyers around 1.3270-80 heading into Wednesday’s European session, despite bouncing off the previous day.

In doing so, the Loonie pair portrays the trader’s anxiety ahead of the key data from the US and Canada. Also likely to have challenged the USDCAD moves are the latest moves in the sentiment.

Late on Tuesday, the news that two Russian-made rockets were fired at Poland and killed two people triggered the risk-off mood. The same triggered emergency meetings of the North Atlantic Treaty Organization (NATO) and the Group of Seven (G7), which in turn favored the US Dollar (USD) due to its safe-haven appeal.

However, the latest news shared by the Associated Press (AP) quoted an anonymous US official’s findings while mentioning that the missile may have been fired by Ukraine. As a result, the risk aversion ebbed and the greenback reversed the early-day gains.

Elsewhere, market forecasts of upbeat US data and the Bank of Canada’s (BOC) bearish bias seem to keep the USDCAD buyers hopeful. On Tuesday, US Producer Price Index (PPI) for October eased to 8.0% YoY versus market forecasts of 8.3% and the downwardly revised prior of 8.4%. It’s worth noting that the monthly figure reprinted the 0.2% prior (revised from 0.4%) while easing below 0.5% expectations. Moreover, the Federal Reserve Bank of New York's Empire State Manufacturing Index jumped to 4.5 in November from -9.1 in October and the market expectation of -5. It should be noted that the US Retail Sales for October is expected to post 1.0% growth versus 0.0% prior.

On a different page, Bank of Canada (BOC) Governor Tiff Macklem raised concerns over the effect of the rapid increases in interest rates on Monday, which in turn suggests easy rate hikes moving forward. In late October, the BOC surprised markets by announcing 0.50% rate hike versus 0.75% expected.

Talking about the oil prices, the WTI crude oil drops 0.60% intraday to $85.65 by the press time amid fears of lower demand, raised by the OPEC earlier in the week. In doing so, the black gold fails to justify the latest weakness in the US Dollar, as well as the decline in the API Weekly Crude Oil Stock to 5.835M for the week ended on November 11 versus 5.618M prior.

Moving on, Canada’s Consumer Price Index (CPI) and the US Retail Sales will be crucial to watch for the USDCAD traders and can provide a corrective bounce from the key DMA support in case of matching market forecasts. Also important to watch is the weekly print of the EIA Crude Oil Stocks Change.

Technical analysis

USDCAD leans bearish between a one-week-old resistance line and the 100-DMA, respectively around 1.3370 and 1.3240.