USD/CAD retreats towards 1.2800 on firmer oil, market consolidation

• USD/CAD consolidates Friday’s gains around 11-week top.
• WTI crude oil rises around 2.0% to $67.50, S&P 500 Futures print mild gains.
• Canadian jobs report came in stronger than US counterparts on Friday but Fed rate hike saved USD.
• Mixed updates over Omicron, Saudi Arabia’s push to Arab light crude prices for Asia favor bears amid cautious optimism.

Having refreshed the multi-day top the previous day, USD/CAD eases to 1.2820 during Monday’s Asian session.

In doing so, the Loonie pair buyers take a breather amid mixed catalysts and a quiet start to the week. Also exerting downside pressure on the USD/CAD is the recently positive prices of Canada’s main export item WTI crude oil.

WTI crude oil rises 2.36% to $67.70 at the latest as risk-on mood joins news from Saudi Arabia. “Saudi Arabia's state oil producer Aramco raised its January official selling price (OSP) to Asia for its flagship Arab Light crude to $3.30 a barrel versus Oman/Dubai crude, up $0.60 from December, the company said on Sunday,” per Reuters.

While portraying the mood, S&P 500 Futures print 0.40% intraday gains and the US 10-year Treasury yields gain 3.5 basis points (bps) to 1.378% by the press time. Wall Street benchmarks closed negative while the US 10-year Treasury yields dropped around 10 basis points (bps) to 1.35%, the lowest since late September, on Friday.

Friday’s US Nonfarm Payrolls (NFP) failed to compress the US dollar gains as the drop in the US Unemployment Rate and hawkish comments from St Louis Fed President James Bullard favored the greenback bulls. That said, US NFP disappointed labor market optimists with 210K figures, versus 550K expected, the Unemployment Rate propelled Fed funds futures with a 0.4% drop to 4.2%. Further, Average Hourly Earnings matched the 4.8% YoY forecast.

At home, Canadian Unemployment Rate slumped to 6.0% versus 6.6% forecast and 6.7% prior whereas the Net Change in Employment jumped past 35K market consensus and 31.2K prior release to 153.7K in November.

It should be noted that the mixed US jobs report highlights the US Consumer Price Index (CPI) for November for USD/CAD traders amid an absence of the Fedspeak ahead of next week’s FOMC meeting. Meanwhile, Wednesday’s Bank of Canada (BOC) and Omicron updates will be important too.

Technical analysis

A clear upside break of a descending trend line from late August, around 1.2755 at the latest, directs USD/CAD bulls towards the yearly top of 1.2949.