USD/CAD struggles near 1.2750 as ‘Omnicron’ enters Canada, yields recover

• USD/CAD rebounds from intraday low after the biggest D1 jump since August.
• Canada reports two cases of the new covid variant in Ottawa.
• WTI crude oil consolidates Friday’s 13% slump as health officials from the US, Israel sound optimistic.
• BOC’s Macklem, Fed’s Powell eyed for fresh impulse.

USD/CAD bounces off the daily bottom to 1.2750, down 0.30% intraday, while nursing the previous day’s heavy run-up during Monday’s Asian session.

Recovery in the prices of Canada’s main export item, WTI crude oil, seems to have underpinned the latest pullback moves of the Loonie pair even as Canada registers two cases of the recently discovered South African covid variant in Ontario. Additionally favoring the USD/CAD sellers could be the recent positives from the US and Israel concerning the ability to fight back the coronavirus strain.

That said, WTI rises 4.50% to $71.25 after marking a 13% slump the previous day. The black gold’s recovery moves should have taken clues from the OPEC’s delay of the Joint Technical Committee and the Joint Ministerial Monitoring Committee (JTC and JMMC) meetings to Wednesday and Thursday.

Read: WTI Price Analysis: Bears remain hopeful around $70.00

Having identified zero cases of the fresh COVID-19 infections in the US, the National Institutes of Health (NIH) officials renewed hopes that the virus vaccines, as well as the booster doses, can help overcome the latest challenge to the global economy. On the same lines were comments from Israeli Professor Dror Mevorach who terms ‘Omnicron’ as less severe than the ‘Delta’ version of the coronavirus.

Alternatively, comments from Atlanta Federal Reserve President Raphael Bostic, rejecting market talks that the virus strain will ease inflation fears by saying, “Covid is the source of inflation,” keep USD/CAD buyers hopeful.

Amid these plays, US 10-year Treasury yields rise five basis points (bps) to 1.53% following the heaviest daily fall since the early days of the pandemic in 2020. Also portraying the improvement in the market sentiment are the mildly bid US stock futures.

Looking forward, second-tier data from the US and Canada may offer intermediate clues to the USD/CAD traders but major attention will be given to the speeches from the Bank of Canada (BOC) Governor Tiff Mecklem and Fed Chairman Jerome Powell. While BOC’s Mecklem has a little room to reject bears, considering two cases of ‘Omnicron’ at home, Fed’s Powell may surprise markets and renew US dollar strength.

Technical analysis

A clear upside break of the three-month-old resistance line, around 1.2780 by the press time, becomes necessary for the USD/CAD bulls to keep controls. Otherwise, pullback moves towards Thursday’s swing low near 1.2640 can’t be ruled out.