USD/CAD sellers attack 1.3600 on firmer oil, Canada inflation, US CB Consumer Confidence eyed

• USD/CAD holds lower grounds during three-day losing streak.
• Oil prices cheer hopes of more demand, easing recession woes.
• US Dollar licks its wounds amid mixed clues.
• BOC CPI, US CB Consumer Confidence will decorate calendar, yields are also important to watch for fresh impulse.

USD/CAD pares intraday losses around 1.3600 even as sellers keep the reins during the three-day downtrend early Wednesday.

The Loonie pair’s latest rebound could be linked to the US Dollar’s consolidation but the broad weakness of the quote is likely to the firmer oil prices, as well as the market’s cautious optimism. However, anxiety ahead of the key data from the US and Canada seems to allow the quote to pare recent losses.

That said, the US Dollar Index (DXY) bounces off its intraday low to 104.10 as it consolidates the biggest daily fall in a week, marked the previous day. The DXY’s slump on Tuesday could be linked to the fears that Japan will be less interested in the US Treasury bonds due to the Bank of Japan's action. Japan is the biggest holder of the US Treasury bonds and the latest move allows Tokyo to put more funds into the nation than letting it flow outside. It’s worth noting that the BOJ shocked markets with a surprise move that suggests lesser funds flowing outside Japanese bond markets due to a policy tweak. The Japanese central bank kept the monetary policy unchanged but widened the band of Yield Curve Control (YCC) to -/+ 0.5% from -/+0.25% prior.

On the other hand, WTI crude oil remains firmer for the third consecutive day, mildly bid near $79.30 by the press time, as receding fears of economic slowdown join hopes of more stimulus from China. That said, China reports zero Covid-linked death and showed readiness for more measures to shrug off the virus-led economic woes.

Elsewhere, the 10-year US Treasury yields rose more than the two-year ones and hence reduced the yield curve inversion that suggests the odds of the recession.

While portraying the mood, which has a positive correlation with the USD/CAD pair, the US 10-year Treasury yields grind near a three-week high of 3.69% while the two-year bond coupons stay firmer around 4.26% by the press time. Further, Wall Street closed in green and allow stocks in the Asia-Pacific bloc to print mild gains of late. Additionally, yields on the two-year Japanese Government Bonds (JGBs) rose beyond 0.0% for the first time since 2015.

Moving on, the Bank of Canada (BOC) Consumer Price Index (CPI) Core for November, expected 6.4% YoY versus 5.8% prior, will join the US Conference Board (CB) Consumer Confidence figures for December, expected at 101.00 versus 100.00 prior, to direct immediate moves. However, major attention will be given to the bond markets after the previous day’s heavy moves.

Technical analysis

USD/CAD drops inside a 1.5-month-old rising wedge bearish chart pattern. Also favoring bears is the impending bear cross on the MACD.

Also read: USD/CAD Price Analysis: Retreats to 1.3600 inside rising wedge