USD/CAD struggles around 1.2500 on sluggish oil, steady yields, US Retail Sales eyed

• USD/CAD hesitates to extend pullback from six-week top, sidelined of late.
• WTI crude oil fades rebound from one-week low amid sluggish sentiment.
• DXY tracks US Treasury yields around multi-day top.
• Cautious sentiment ahead of US data joins mixed concerns over Fed rate hike, Sino-American talks to test momentum traders.

USD/CAD bears take a breather after a two-day downtrend, taking rounds to 1.2510 during Tuesday’s Asian session. In doing so, the Loonie pair portrays the market’s indecision ahead of the key US Retail Sales amid mixed catalysts.

Among the positives are the chatters over the US stimulus and Fed’s next moves, as well as US-China virtual meeting, whereas WTI crude oil’s rebound joins Bank of Canada (BOC) rate lift talks to weigh on the USD/CAD prices.

WTI crude oil cheered hopes of increasing demand and US President Joe Biden’s formal announcement of the $1.0 trillion infrastructure spending plan. Also favoring the oil bulls, and the USD/CAD bears in turn, was the US policymakers’ struggle to defend the Democratic pressure to tap the Strategic Petroleum Reserve (SPR) to cap elevated gasoline prices.

Elsewhere, US President Joe Biden and his Chinese counterpart Xi Jinping are up for a virtual meeting after multiple months of silence among the world’s top two economies, which favor the sentiment and weigh on the USD/CAD prices. However, the multi-year high US inflation expectations keep the pair buyers hopeful despite the Fed policymakers' rejection of a rate hike concerns. Recently, Richmond Federal Reserve Bank President Thomas Barkin said, “If ‘need is there’ fed will act to curb inflation, but good to have a few more months ‘to see where reality is.’”

Amid these plays, the US 10-year Treasury yields jumped to a fresh three-week high, recently sluggish around 1.61%, while previously underpinning the US Dollar Index rally to renew the yearly top. However, the Wall Street benchmarks traded mixed and restrict the initial moves of the S&P 500 Futures.

Moving on, updates from the first in many months talks between US President Joe Biden and his Chinese counterpart Xi Jinping will offer immediate direction to the USD/CAD traders ahead of the US Retail Sales for October, expected to reprint the 0.7% MoM growth.

Read: US Retail Sales October Preview: Inflation Is the key, not Retail Sales

Technical analysis

USD/CAD pullback from 50% Fibonacci retracement of August-October downtrend, around 1.2620, directs the quote towards the 200-DMA level of 1.2470.