USD/CAD meanders around 1.2800 amid thin-liquidity conditions as the end of the year approaches

• The USD/CAD pares some Monday losses, up some 0.09%.
• Despite recording a daily high of Covid-19 cases, around 1.4 million worldwide, investors’ mood is upbeat.
• High US crude oil prices failed to lift the CAD prospects.
• USD/CAD Price Forecast: Range-bound, though slightly tilted to the downside.

The USD/CAD bounces off weekly lows trading at 1.2804 during the New York session at the time of writing. Financial markets are in a risk-on mood as the S&P 500 approaches the 4,800 barrier, despite recording the largest increase of Covid-19 infections worldwide, topping 1.4 million. In the meantime, Western Texas Intermediate, US crude oil benchmark, which correlates with the Canadian dollar, advances some 0.97%, trading at $76.28 a barrel, failing to lift the loonie prospects.

In the meantime, the US Dollar Index, which measures the greenback’s performance against a  basket of its rivals, remains unchanged at 96.10, underpinned by the US 10-year T-bond yield down one basis point, sitting at 1.464%.

Apart from this, the US Center for Disease Control and Prevention (CDC) announced reduced isolation time, from 10 to 5 days, a major change as the Omicron variant takes its toll in American citizens. On Monday in France introduced some restrictions, like working from home at least three times a week, while the UK stays put but ready to act if it is needed.

The USD/CAD remained subdued in the overnight session, within familiar levels as the lack of liquidity has kept most G8 currencies “trapped” in narrow ranges. In the case of the Loonie, the range has been 1.2780-1.2800, with the only macroeconomic data of importance to be released, the US Initial Jobless Claims, for the week ending on December 23. That said, USD/CAD traders would lean on market sentiment, commodity prices behavior in particular oil, and US dollar dynamics as the year-end looms.

USD/CAD Price Forecast: Technical outlook

The USD/CAD 1-hour chart depicts consolidation in the last two trading days, though the CAD strengthened on Monday, falling from 1.2846 to 1.2780s. The downward move stalled around the December 24 daily low at 1.2785, but on its way south pierced the 50-hour simple moving average (SMA).

At press time, the pair would find strong resistance at the confluence of the daily central pivot point and the 50-hour SMA at 1.2802. A break above that level would send USD/CAD to the 100-hour SMA at 1.2820, followed by the  R1 daily pivot at 1.2826.

On the other hand, USD/CAD’s first line of defense to the downside would be the December 27 daily low at 1.2778, followed by the December 16 swing low at 1.2763. A breach of the latter would expose the S1 daily pivot at 1.2758, followed by the S2 pivot at 1.2734.