USD/CAD consolidates around 1.3460 amid lower Crude prices, subdued US Dollar

• USD/CAD moves sideways during a quiet Asian session on Monday.
• The decline in the WTI price could put pressure on the Canadian Dollar.
• US CPI YoY and MoM could decrease to 3.0% and 0.2%, respectively, in January.

USD/CAD moves sideways on Monday after witnessing a volatile session on Friday. The pair hovers around 1.3460 during the Asian session. The decline in Crude oil prices might have weighed on the Canadian Dollar (CAD), given the fact that Canada is the largest oil exporter to the United States (US).

The price of West Texas Intermediate (WTI) Crude oil paused its five-day winning streak from the previous week, dipping slightly to approximately $76.50 per barrel at the current time. This decline in crude oil prices follows Israel's conclusion of a series of strikes in Gaza's southern city of Rafah. The cessation of hostilities has alleviated concerns about potential disruptions to oil supply in the Red Sea region.

On Friday, the USD/CAD pair experienced downward pressure following the release of mixed Canadian employment data. However, market sentiment shifted as traders recalibrated their exposure to the Greenback after the US Bureau of Labor Statistics (BLS) implemented broad seasonal adjustment changes to the calculation of the Consumer Price Index (CPI). These adjustments resulted in minor alterations to near-term inflation projections.

Canadian Unemployment Rate surprisingly decreased to 5.7% in January from 5.8% prior, better than the market expectation of 5.9% reading. While Net Change in Employment rose to 37.3K, exceeding the expected 15.0K and 12.3K prior. However, Average Hourly Wages (YoY) grew by 5.3% against the previous growth of 5.7%.

The US Dollar Index (DXY) is on a downward trajectory despite stable US bond yields, inching lower to near 104.00 with 2-year and 10-year US yields standing at 4.48% and 4.17%, respectively, at the time of writing. The downward trend in the US Dollar (USD) could be attributed to a prevailing risk-on sentiment in the market, especially ahead of the Consumer Price Index (CPI) data scheduled to be released on Tuesday.

Analysts anticipate a decrease in January’s CPI (YoY) to 3.0%, down from December's 3.4%. Additionally, the monthly CPI data is expected to eased at 0.2% from the 0.3% prior.