USD/CAD consolidates losses around weekly low under 1.2800 as oil eases from monthly peak

• USD/CAD grinds lower, close to one-week bottom amid inactive markets.
• Oil consolidates the biggest daily gains in three weeks as markets await fresh clues.
• US T-bond yields pause the previous day’s declines, stock futures ease.
• US housing, activity data will join API oil inventories and risk catalysts to direct short-term moves.

USD/CAD struggles to regain the 1.2800 threshold while licking the previous day’s wounds during Tuesday’s Asian session. The loonie pair seems to track the halt in risk-on mood as well as a pullback in prices of Canada’s main export item WTI crude oil to challenge the one-week-old downside from the yearly top.

A rethink over the previous optimism surrounding the South African covid variant, namely Omicron, as well as an absence of major updates, could be held responsible for the recent pause in the US dollar weakness. Even so, the holiday mood in the market joins a light news feed to challenge the pair’s momentum.

While portraying the mood, the S&P 500 Futures print 0.05% intraday loss even as the Wall Street benchmark refreshed all-time high. That said, the US 10-year Treasury yields seesaw around 1.48% after the 1.7 basis points (bps) of a decline the previous day.

Studies from South Africa and the UK, showing fewer odds of hospitalization due to the Omicron covid variant, eased market fears from the South African covid variant. Also on the positive side were comments from US Vice President Kamala Harris who signaled to use her tie-breaking vote to pass President Joe Biden’s Build Back Better (BBB) stimulus plan. Further, ongoing talks over Iran’s denuclearization and a global push for peace between Russia and Ukraine also seem to have favored the USD/CAD bears.

It’s worth noting that the jump in the virus cases and fears of a pullback in oil prices could challenge the USD/CAD sellers amid an absence of major catalysts. Even so, US housing and Richmond Fed Manufacturing data will precede the weekly prints of industry inventory figures from the American Petroleum Institute to direct short-term USD/CAD moves.

Technical analysis

A clear downside break of 21-DMA, around 1.2800 at the latest, directs USD/CAD bears towards an ascending support line from early November, surrounding 1.2755.