USD/CAD retreats to 1.2800 as oil sellers take a breather, focus on risk catalysts

• USD/CAD pares intraday gains, the first in three days.
• Oil prices struggle to cheer US-Iran tension amid Omicron, China headlines.
• Yields weigh USD amid a quiet session, light calendar ahead.

USD/CAD steps back from intraday high to 1.2790, consolidating the first daily gains in three ahead of Friday’s European session. The reason could be linked to the pause in the prices of Canada’s main export item WTI crude oil, as well as downbeat US Treasury yields, amid a sluggish session.

WTI bounces off intraday low to $71.45, down 0.60% on a day, by the press time. In doing so, the black gold ignores a halt in the US-Iran nuclear talks and the US-China tussles over Xinjiang-related issues.

That said, the market’s risk-off mood fails to underpin the US Treasury yields as the major central bankers tightened monetary policy, fueling demand for the US bonds. The same weigh on the US Dollar Index (DXY) and favor the USD/CAD sellers.

Against this backdrop, the US 10-year Treasury yields drop for the second consecutive day while stock futures and Asia-Pacific stocks printed losses by the press time.

Given the mixed concerns and the US dollar’s failures to cheer the Fed’s hawkish move, USD/CAD traders will wait for more clues before recalling the bulls. Though, the economic calendar signals a quiet end to the busy week and hence risk catalysts will be important to follow for fresh impulse.

Technical analysis

USD/CAD sellers keep reins around 1.2775, despite recently sidelined performance due to the sustained trading below the previous weekly support line. That said, the quote seesaws around 50% Fibonacci retracement (Fibo.) of December 08-15 upside.

The corrective pullback has limited room to the north as a convergence of the 100-HMA and 38.2% Fibo. near 1.2815 will be a tough nut to crack for intraday buyers. Meanwhile, a clear downside break of the 50% Fibonacci retracement level close to 1.2770 will be challenged by the 200-HMA and 61.8% Fibo., respectively around 1.2750 and 1.2730.