USD/CAD bears eye 1.2700 on firmer oil, upbeat sentiment, focus on Canada inflation, Fed Minutes

• USD/CAD remains pressured around weekly low, on the back foot for the third consecutive day.
• DXY tracks yields to pare recent gains as market sentiment improves on easing Russia-linked fears.
• Canada CPI, FOMC Minutes and US Retail Sales will decorate the calendar.

USD/CAD stays depressed around 1.2710, down 0.14% intraday heading into Wednesday’s European session.

In doing so, the Loonie pair drops for the third consecutive day as the US dollar pares some of its latest gains. Also favoring the USD/CAD bears is the recently firmer WTI crude oil, the biggest export earner of Canada.

That said, the US Dollar Index (DXY) retreats from daily top to 95.98 by the press time, after declining the most in two weeks the previous day. Further, the WTI crude oil prices print mild gains around $90.35-40 at the latest.

Behind the moves could be diffusing geopolitical tensions surrounding Russia. Hopes of no further escalation in the Russia-Ukraine tussles gained momentum after Moscow rolled back some of its troops from borders, which in turn favored the Wall Street benchmarks and weighed on prices of gold and crude the previous day.

Also acting as a bearish catalyst is the mixed US data and anxiety ahead of today’s key data/events.

It’s worth noting that, the US Producer Price Index (PPI) data showed a hot factory-gate inflation figure supporting the Fed’s rate-hike concerns. That said, the PPI rose past 9.1% YoY expectations to 9.7%, versus upwardly revised 9.8% prior, in January whereas the Producer Price Index ex Food & Energy, also known as Core PPI, rallied to 8.3% versus 7.9% market consensus. Additionally, NY Empire State Manufacturing Index eased below 12.15 forecasts to 3.1, compared to -0.7 previous readouts.

While portraying the mood, the US 10-year Treasury yields remain pressured around 2.0% whereas S&P 500 Future dropped 0.20% intraday at the latest. Additionally, the Asia-Pacific shares edge high by the press time.

Looking forward, January Retail Sales from the US, expected to reverse -1.9% previous contraction with +2.0% growth, will join the BOC Consumer Price Index Core, market consensus +4.6% YoY versus +4.0% prior, for the stated month to direct immediate moves. Following that, Federal Open Market Committee (FOMC) Minutes will be crucial amid 0.50% rate hike concerns. Above all, risk catalysts and oil price moves will be important to watch for clear direction.

Technical analysis

After multiple failures to cross a downward sloping trend line from January 06, USD/CAD broke a one-week-old rising support line the previous day. The bearish bias also gains support from the RSI line. However, a clear downside break of the 50-SMA on the four-hour chart, around 1.2715 by the press time, becomes necessary for the sellers.