USDCAD struggles above 1.3400 despite softer oil prices, US midterm election updates in focus

• USDCAD seesaws around multi-day low, picks up bids of late.
• Challenges to sentiment from the US election results, China’s covid conditions test USDCAD bears.
• DXY rebound, higher inventories weigh on oil prices.
• Risk catalysts eyed for directions ahead of US CPI, speech from BOC’s Macklem.

USDCAD grinds near 1.3450 heading into Wednesday’s European session amid dicey markets. The anxiety over US government gridlock joins covid fears from China and a cautious mood ahead of the key data/events to restrict the Loonie pair’s latest moves.

That said, softer prices of Canada’s key export item, namely the WTI Crude Oil, tease the USDCAD bulls. The energy benchmark drops for the third consecutive day down 0.85% intraday near $87.75 by the press time.

Also read: WTI bears attack $88.00 as concerns over China’s demand, US midterm elections join API inventory build

Elsewhere, the US Dollar Index (DXY) prints mild gains around 109.70 amid the escalating fears of the US government gridlock due to the latest updates from the mid-term elections. Also fueling the market’s fears and the USDCAD prices could be the headlines suggesting a six-month high covid number from China and further virus-led lockdowns.

While portraying the market’s mood, the S&P 500 Futures struggle to track Wall Street’s gains while the US 10-year Treasury yields probe bears after snapping a four-day downtrend the previous day.

It should be noted, however, that the anxiety ahead of Thursday’s US Consumer Price Index (CPI) for October and a speech from the Bank of Canada (BOC) Governor Tiff Macklem challenge the pair buyers. The reason could be linked to the recently mixed US data and Fedspeak, as well as the BOC’s easing in the rate hikes.

Also read: US Inflation Preview: Markets set to seize on falling Core CPI to revive pivot play, three scenarios

Technical analysis

A one-week-old descending trend line portrays the USDCAD pair’s recent weakness. Also keeping the sellers hopeful are the bearish MACD signal and the clear break of the previous support line from early October. Additionally, the pair’s sustained trading below the 200-SMA also adds strength to the downside bias.