USD/CAD eases below 1.2600 ahead of Canadian Retail Sales

• USD/CAD resumes its decline as WTI’s recovery counters USD rebound.
• A cautious mood amid inflation concerns buoys the greenback.
• Focus shifts to the Canadian Retail Sales, Fedspeak for fresh trades.       

USD/CAD is breaking its overnight consolidative mode to the downside into the European session this Friday, extending below the 1.2600 mark.

The major looks to extend its corrective pullback from six-week highs of 1.2648 heading into the Canadian Retail Sales data. Stronger data is likely to intensify inflation concerns, which will, in turn, bolster the Bank of Canada’s (BOC) rate hike expectations.

The currency pair is stuck in a narrow range, as the bulls continue to find support from the rebound in the US dollar across the board. Meanwhile, the recovery rally in WTI prices keeps the downside pressure intact on the spot, leading to a bull-bear tug-of-war for now.

WTI stages a comeback after the recent sell-off to multi-week lows on reports that the US is likely to release oil supplies from its Strategic Petroleum Reserve (SPR) to ease the supply crunch and take advantage of the price rise.

However, the US dollar bulls are back in the game after a two-day decline, which may spoil the WTI recovery-led advance in the Canadian dollar.

Looking ahead, looming inflation risks and Fed speculation will continue to play a key role in driving the market sentiment, eventually impacting the dollar trades and the USDCAD pair.

USD/CAD: Technical levels to watch out