USD/CAD aims to retest five-week high at 1.3700 despite downbeat US Retail Sales data

• USD/CAD is looking to recapture a five-week high at 1.3700 amid a risk-off market mood.
• Soaring recession risk resulted in a steep fall in risk-perceived currencies like S&P500.
• Oil price is oscillating in a range of $75.50-77.50 as investors await fresh trigger for decisive action.

The USD/CAD pair is aiming to continue its upside momentum and retest the fresh five-week high at 1.3700 ahead. The Canadian Dollar major asset is expected to extend its upside recovery amid a solid risk aversion theme underpinned by the market participants.

S&P500 plummeted on Thursday as the recession risk soared after the Federal Reserve (Fed) stepped up interest rate peak guidance to achieve price stability, portraying a risk-off mood. The US Dollar Index (DXY) showed a solid recovery to near 104.80. The USD Index has corrected marginally to near 104.60, however, the upside momentum is still intact.

Meanwhile, US government bonds continued to gain demand from the market participants as the Fed shifted to a slower and smaller interest rate hike approach. The 10-year US Treasury yields have dropped further to near 3.45%.

On Thursday, the United States Retail Sales data displayed a downbeat show despite accelerating employment numbers and earnings in November. The monthly Retail Sales data (Nov) reported a contraction of 0.6% while the street was expecting a contraction of 0.1%. A decline in retail demand indicates more downside pressure on inflation ahead as lower consumer spending is the key to a lower Consumer Price Index (CPI). This will force producers to cut prices of goods and services ahead.

Meanwhile, oil prices are displaying topsy-turvy moves after a sheer bullish reversal. The black gold is oscillating in a range of $75.50-77.50 as investors await a fresh trigger for decisive action. It is worth noting that Canada is a leading oil exporter to the United States and higher oil prices support the Canadian Dollar.