USD/CAD struggles around 1.2900 amid weaker oil prices, risk-off mood

• USD/CAD grinds higher following the highest daily close in 2021.
• Risk appetite sours amid Omicron fears, Fed rate-hike concern, as well as US stimulus issues.
• WTI crude oil dropped over 1.5% to refresh two-week low.
• Qualitative factors will direct short-term market moves amid a light calendar.

USD/CAD seesaws near 1.2900 during Monday’s Asian session, following the strong daily jump in three weeks to print the highest daily closing in 2021.

The Loonie pair buyers seem to cheer downbeat prices of Canada’s key export item, namely WTI crude oil. However, the risk-aversion wave and mixed updates amid a light calendar seem to challenge the bulls around the key resistance line of late.

WTI drops 1.55% to $69.20 by the press time, after refreshing the fortnight low of $68.79. In doing so, the black gold seems to bear the burden of the strong US Dollar Index (DXY) and sour sentiment.

That said, DXY jumped the most in six weeks the previous day after comments from Fed Board of Governors member Christopher Waller renewed Fed rate-hike concerns. “The ‘whole point’ of the Fed's decision to accelerate the pace of its QE taper was to make the March Fed meeting ‘live’ for a first rate hike,” said the policymaker per Reuters.

It’s worth noting that a jump in the covid cases in Canada, recently by 4,177, recalled the capacity limits and gather caps in Ontario. Fears of the South African covid variant, dubbed as Omicron, escalate in other developed countries as well. The UK marked the biggest run-up in daily COVID-19 infections the previous day while the weekly count also spiked 52%. Further, Senior US Medical Expert Anthony Fauci fears more measures to curb the COVID-19 cases.

On a different page, disappointment over US President Joe Biden’s Build Back Better (BBB) plan, after the key Senator refused to back the stimulus, also weigh on the market sentiment. . “West Virginia's Joe Manchin appeared to deal a fatal blow to President Joe Biden's signature domestic policy bill, known as Build Back Better, which also aims to expand the social safety net and tackle climate change,” said Reuters.

Alternatively, China’s troubled firm Kaisa files for resumption of trading of the company’s shares while also saying, per Reuters, “ It has not received any notice from bondholders to accelerate repayments yet as the embattled Chinese property developer has not repaid a $400 million bond, or interest on notes due in 2023 and 2025.”

Amid these plays, S&P 500 Futures drop 0.40% whereas the US 10-year Treasury yields drop 1.3 basis points (bps) to 1.38%, down for the third consecutive day at the latest.

Given the latest risk-off mood and a light calendar, sentiment-related headlines are the key to fresh impulse.

Technical analysis

A five-month-old ascending resistance line near 1.2910 appears a tough nut to crack for the USD/CAD bulls. Alternatively, the 10-DMA level of 1.2780 restricts short-term pullback moves.