USD/CAD: Off intraday low past 1.2700 on steady yields, firmer oil prices, focus on PMIs

• USD/CAD pares the biggest daily fall in a fortnight, refreshes intraday low at the latest.
• Yields await fresh clues to extend run-up, USD pullback favors oil buyers.
• OPEC+ meeting, US/Canada PMIs for December will be in focus.

After a strong start of 2022, USD/CAD declines 0.20% intraday to 1.2730 while consolidating recent gains ahead of Tuesday’s European session.

The Loonie pair tracked US Treasury yields to the north while rising the most in two weeks. The recent weakness, however, could also be linked to the mildly bid prices of Canada’s main export item, WTI crude oil.

Despite recently easing to $75.95, WTI crude oil prints 0.15% intraday gains, up for the second consecutive day. In doing so, the black gold cheered cautious optimism in the markets ahead of the OPEC+ verdict. In this regard, Reuters said, “OPEC+ is expected to stick to its plans to increase output in February when it meets on Tuesday, seeing a mild and short-lived impact on demand from the Omicron coronavirus variant, three sources from the oil producer group told on Monday.”

Elsewhere, the US Treasury yields remain steady around the highest levels in six weeks, after the biggest daily jump in multiple days. That said, the 10-year bond coupon pokes 1.63% while the 2-year yields seesaw near the highest level since March 2020. Additionally, the US Dollar Index (DXY) struggles to extend the previous day’s gains, the heaviest in two weeks.

While firmer US stock futures and mixed performance of the Asia-Pacific shares could be linked for the market’s latest consolidation, fears of the South African covid variant and faster rate hike by the US Federal Reserve (Fed) keep favoring the USD/CAD buyers.

Even so, Canadian Markit Manufacturing PMI for December and the US ISM Manufacturing PMI for the said month, expected 57.5 and 60.2 versus 57.2 and 61.1 in that order, will be important to the USD/CAD traders.

Furthermore, updates from the OPEC+, virus news and US Treasury yields are also important to forecast short-term USD/CAD performance.

Technical analysis

Unless crossing a two-week-old resistance line, near 1.2765 by the press time, USD/CAD stays directed towards the 100-DMA level of 1.2630. That said, bearish MACD signals and a steady RSI line keep sellers hopeful.