USD/CAD: On the defensive above 1.2700 amid USD pullback, WTI recovery

• USD/CAD consolidates above 1.2700 amid USD retreat, firmer WTI.
• BOC Macklem confirms a 50bps rate hike to counter raging inflation.
• Focus shifts to key US data and BOC Lane’s speech.

USD/CAD is on the back foot, keeping its range above 1.2700 amid a broad pullback in the US dollar and firmer WTI prices.

The US dollar is seeing a bit of a correction against its major peers after opening the week with a bang amid strong risk-aversion, spurred by global growth fears on raging inflation and hawkish Fed bets.

Meanwhile, WTI is staging a modest comeback after the previous meltdown on demand concerns after covid outbreaks in China spread to the capital, with markets speculating the risks of a lockdown in Beijing. Note that China is the world’s second-biggest oil consumer.  

The US oil is currently trading at $98.80, looking to extend its recovery mode from weekly lows of $95.07 reached Monday.

Additionally, the Canadian dollar continues to draw support from hawkish remarks from Bank of Canada (BOC) Governor Tiff Macklem. Speaking with the Federal Finance Committee on Monday, Macklem said the BOC was considering a second consecutive 0.5% increase in an effort to tackle runaway inflation.

Looking ahead, the pair will continue to follow the price action in the dollar, as well as, the US oil, in absence of any top-tier economic releases from the US and Canada. Although the speech by Bank of Canada (BOC) Governor Tiff Macklem will also hog the limelight.

Next of relevance for the major remains the US Durable Goods and CB Consumer Confidence data due later in the NA session this Tuesday. Also, of note remains the speech by the BOC Deputy Governor Timothy Lane.

USD/CAD: Technical levels to consider