USD/CAD refreshes three-week low under 1.2750 amid firmer oil, inactive markets

• USD/CAD takes offers to renew multi-day bottom, down for the third consecutive day.
• Oil prices benefit from cautious optimism concerning Omicron, geopolitical fears.
• Quebec set a curfew to slow down the virus increase, US reports record high covid cases.
• Lack of major data/events could offer a sluggish end to 2021 but bears are likely to turn hopeful.

USD/CAD remains on the back foot for the third consecutive day, taking offers around 1.2730 to refresh multi-day low during the early Friday morning in Europe.

The latest weakness in the USD/CAD prices could be linked to the consolidation in the market’s early Asian risk-off mood, as well as mildly bid oil prices. However, thin end-of-year liquidity conditions and an absence of major data/events could restrict the pair’s immediate moves.

WTI crude oil prices, Canada’s main export item, add 0.05% intraday while taking rounds to the five-week top flashed the previous day. Behind the oil’s moves could be the market’s hopes of fewer health emergencies due to the South African covid variant, namely Omicron, as well as fears of geopolitical tension in the Middle East.

Read: WTI justifies Thursday’s bearish Doji, ignores China PMI to ease around $76.00

It’s worth noting that the global policymakers, ex-Canada, seem to take Omicron a bit lightly as the majority of them have refrained from major lockdown majors around the year-end celebrations. However, Quebec is the odd one out to put a 10:00 pm to 5:00 am curfew in place. On the other hand, Reuters’ tally for the US seven-day average of new coronavirus cases refreshes record top for the second consecutive day with 290,000 latest figures.

Talking about the geopolitics, Iran’s space launch derails previous optimism concerning the denuclearization deal with the global leaders. On the same line were the dislikes of China and Hong Kong for the US push to release Hong Kong-based journalists. Also portraying the fears of the geopolitical tension were the headlines from Reuters over Ukraine, “US President Joe Biden and his Russian counterpart Vladimir Putin on Thursday warned each other that an escalation of tensions over Ukraine could rupture relations between the two countries, U.S. and Russian officials said.”

Amid these plays, the Wall Street benchmarks posted mild losses whereas the S&P 500 Futures pare intraday losses, recently down 0.20% on a day.

To sum up, USD/CAD bears are likely to keep reins amid firmer oil and currently improving market sentiment. However, the year-end liquidity crunch may restrict the pair’s moves for the day.

Read: USD/CAD Price Forecast 2022: One reason the loonie will outperform other currencies against the US dollar

Technical analysis

While refreshing the multi-day low, the USD/CAD pair broke an ascending support line, now resistance, from November 10, which in turn joins descending Momentum line to favor sellers. That said, 38.2% Fibonacci retracement of October-December upside, around 1.2705, can restrict the quote’s immediate declines before directing USD/CAD sellers towards the 50-DMA level of 1.2655.

Alternatively, recovery moves remain elusive below a confluence of the previous support line and 21-DMA, near 1.2800.