USDCAD juggles below 1.3300 ahead of Canada Inflation, oil recovers firmly

• USDCAD is displaying a balanced auction below 1.3300 as the focus has shifted to Canada inflation data.
• The DXY is eyeing higher levels amid Russia-Poland tensions.
• Canada’s headline and core CPI are seen at 6.9% and 6.3% respectively.
• Oil prices have rebounded as fresh geopolitical tensions could disrupt the supply chain mechanism further.

The USDCAD pair has turned sideways below the critical support of 1.3300 in the Tokyo session. The upside in the asset is capped by a significant recovery in oil prices while the downside is cushioned by geopolitical tensions between Russia and Poland after Russian military attacks. On a broader note, the asset is oscillating in a 1.3248-1.3336 range ahead of the release of Canada’s Consumer Price Index (CPI) data.

S&P500 futures have displayed weakness in Asia despite Polish President Andrzej Duda confirming that what happened was a one-off incident, adding that there were no indications that there will be a repeat of today's incident. The negative market sentiment is still active as the outcome of the NATO ambassadors meeting will provide meaningful cues to the market participants.

Meanwhile, the US dollar index (DXY) is advancing gradually to test Tuesday’s high around 107.00. The returns on US government bonds have failed to capitalize on weaker market sentiment. The 10-year US Treasury yields are trading around 3.77% as expectations for the continuation of the current rate hike pace by the Federal Reserve (Fed) have plummeted.

On the Loonie front, investors will keep an eye on the inflation data. The headline Consumer Price Index (CPI) is seen stable at 6.9% while core CPI that excludes oil and food prices is expected to escalate to 6.3% from the prior release of 6.0%. The Bank of Canada (BOC) has been elevating interest rates at a significant pace and no meaningful decline in price pressures could accelerate recession fears.

Oil prices have rebounded firmly as a resurgence in Russian military attacks and this time to Poland could result in more sanctions on Russia from European Union (EU) and other agencies. Also, the chances of further disruption in the supply chain could dampen oil transmission activity. Apart from that, US oil inventories have declined significantly by 5.835 million barrels last week, as reported by American Petroleum Institute (API).