USD/CAD slides to 1.3350 as Oil consolidates recent losses, US Dollar eases on Fed, Covid chatters
|- USD/CAD takes offers to print three-day downtrend, renews weekly low.
- Oil prices rebound after a heavy slump amid cautious optimism in the market.
- US Dollar drops on concerns that the Fed is near to ‘pivot’.
- Thanksgiving holiday, light calendar can restrict the pair’s immediate moves.
USD/CAD holds on the bearish bias as it refreshes the weekly low near 1.3350 during early Thursday. In doing so, the Loonie pair reverses the previous week’s gains, the first in five, amid recently firmer prices of WTI crude oil and a broad-based US Dollar weakness.
WTI crude oil, Canada’s biggest export item, licks its wounds around $77.80 while paring the biggest daily fall in two months amid the market’s mildly bid sentiment. The black gold’s previous downside could be linked to the fears of less demand due to the coronavirus-linked lockdowns in China, as well as expectations of more supplies from OPEC+. However, the US Dollar's weakness and chatters over a gradual opening in the dragon nation appeared to have favored the energy buyers of late.
That said, Bloomberg reports that China’s daily Covid infections climbed to a record high, exceeding the previous peak in April, as it battles an outbreak that has grown since the country adopted a more targeted approach to containing the virus. The news also added that the country reported 29,754 new cases for Wednesday, more than the 28,973 infections recorded in mid-April when the financial hub of Shanghai was in the midst of a grueling two-month lockdown that saw residents struggle to access food and medical services. Even so, Chinese policymakers are warned about altering the zero-covid policy in the latest mediate coverage.
It’s worth noting that the hopes of Chinese government measures to ease the pains of the real-estate and financial sector, as well as chatters surrounding a cut to the People’s Bank of China’s (PBOC) Reserve Requirement Ratio, also seemed to have favored the risk-on mood.
On the other hand, the US Dollar Index (DXY) dropped the most in a fortnight the previous day after the latest Federal Open Market Committee (FOMC) Meeting Minutes signaled that the policymakers discussed the need of slowing down the interest rate hikes. Additionally weighing on the Greenback were chatters over the “sufficiently restrictive” level of the Federal Reserve’s (Fed) interest rates, as indicated in the Fed Minutes.
Additionally, downbeat prints of the US activity data for November also weighed on the US Dollar and favored the USD/CAD bears. The preliminary readings of the US S&P Global Manufacturing PMI for November eased to 47.6 from 50.0 expected and 50.4 prior whereas the Services PMI also followed the suit while declining to 46.1 compared to 47.9 market forecasts and 47.8 previous readings. Overall, the S&P Global Composite PMI for November dropped to 46.3 versus 47.7 expected and 48.2 prior readouts.
Amid these plays, S&P 500 Futures print mild gains while Treasury yields stay pressured around 3.69%.
Moving on, a light calendar can keep the USD/CAD bears hopeful but a corrective bounce amid a lack of liquidity can’t be ruled out.
Technical analysis
A clear U-turn from the 21-DMA hurdle, around 1.3455 by the press time, directs USD/CAD bears towards the 100-DMA support near 1.3265.
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