USD/CAD grinds higher past 1.2800 amid sluggish oil, inactive markets

• USD/CAD picks up bids towards intraday high, up for the second consecutive day.
• Market sentiment stays divided over Omicron cases and their implications but USD stays firmer.
• Yields drops, oil seesaws near the monthly top as Fed rate-hike concerns grow.
• Second-tier US data, risk catalysts eyed for fresh impulse.

USD/CAD rises 0.08% intraday, marking the biggest intraday gains among the G10 currency pair heading into Wednesday’s European session. That said, the Loonie pair prints 1.2822 as a quote by the press time.

The pair prices recovered from a one-week low the previous day as the US dollar benefited from the risk-off mood and increasing hopes of the Federal Reserve’s (Fed) early rate hike. Adding to the bullish bias is the sluggish prices of Canada’s biggest export item, WTI crude oil.

On Tuesday, the US Dollar Index (DXY) rose the most in a week after mixed data at home joined strong inflation expectations. That said, the US inflation expectations data, as per 10-Year Breakeven Inflation Rate numbers from the Federal Reserve Bank of St. Louis (FRED), stayed near the three-week high of 2.50% at the latest.

It’s worth noting that the firmer prints of nearby Treasury bond coupons also propelled USD/CAD prices of late. The US 10-year Treasury yields remain pressured around 1.475% while the two-year benchmark, which jumped to the highest since March 2020, also flirts with a 0.742% level, down 0.8 basis points (bps). On the contrary, seesaw around -0.232% level, near to the five-week high flashed the previous day.

WTI crude oil prices struggle around $75.90, up 0.10%, after stepping back from the monthly high of $76.75. The second day of over one million covid infections globally and record-high COVID-19 daily cases from France and the UK dim energy demand outlook.

“Quebec, the second most populous Canadian province, has ‘no choice’ but to allow some essential workers to continue working even after testing positive for COVID-19 to prevent staff shortages from impeding its healthcare services, Health Minister Christian Dube said Tuesday,” per Reuters.

Talking about data, the US reported mixed data the previous day with the US Housing Price Index eased below 1.2% forecast to 1.1% in October while S&P/Case-Shiller Home Price Indices stepped back from 19.5% prior to 18.4%, versus 18.5% market consensus. However, the Richmond Fed Manufacturing Index for December crossed the upwardly revised 12.00 figure with 16.00%.

Moving on, a light calendar and cautious sentiment can keep USD/CAD firmer while the US Pending Home Sales and Goods Trade Balance for November will decorate the calendar.

Technical analysis

USD/CAD remains chopped between the weekly resistance line and 50-HMA, respectively around 1.2830 and 1.2805, with firmer RSI conditions favoring the bulls.