USD/CAD copies Oil’s inaction near mid-1.3400s, Canada employment, early signals for US inflation eyed

• USD/CAD pauses two-day uptrend but remains sidelined amid cautious markets.
• Oil price struggles amid recession woes, softer US Dollar.
• Canada employment data will be crucial after BoC’s Macklem teased a pause in rate hikes.
• Preliminary readings of US Michigan Consumer Sentiment, 5-year inflation expectations eyed to forecast next week’s US inflation data.

USD/CAD aptly portrays the pre-data anxiety as it seesaws around 1.3450 during early Friday, after a two-day uptrend, as traders await the key statistics from Canada and the US. In doing so, the Loonie pair also takes clues from the idle Oil price.

Other than the pre-data caution, the mixed sentiment in the market also challenges the USD/CAD pair traders as the recession woes contrast with softer US data and downbeat Fedspeak.

It should be noted that the WTI crude oil remains indecisive around $78.00, after reversing from a one-week high. That said, the recently softer China inflation numbers and recession woes seem to challenge the energy benchmark even as the softer US Dollar underpin the bullish bias.

On Thursday, a negative difference between the US 10-year and 2-year Treasury bond yields amplified the recession woes as the yield curve inversion jumped to the widest since 1980. It’s worth noting that both these key bond yields remain mostly inactive around 3.67% and 4.49% respectively by the press time.

On the other hand, the downbeat prints of the US Weekly Initial Jobless Claims, which rose to 196K versus 190K expected and 183K prior, joined comments from Richmond Federal Reserve (Fed) President Thomas Barkin to weigh on the US Dollar. Fed’s Barkin appeared too dovish while suggesting rate cuts as he said that it would make sense for the Fed to steer "more deliberately" from here due to lagged effects of policy. Previously, Fed Chair Jerome Powell hesitated in cheering the upbeat US jobs report and raised fears of no more hawkish moves from the US central bank.

Amid these plays, S&P 500 Futures struggle for clear directions even as Wall Street closed with losses.

Moving on, Canada employment data for January will be important after Bank of Canada (BoC) Governor Tiff Macklem teased a pause in the rate hike. Additionally, the early signals for the next week’s US inflation data, namely preliminary readings of the United States consumer-centric numbers for February like the Michigan Consumer Sentiment Index and 5-year Consumer Inflation Expectations will be crucial for clear directions.

Forecasts suggest downbeat prints of Canada jobs reports contrasting the US data, which in turn can propel the USD/CAD pair.

Technical analysis

Despite repeatedly bouncing off the 21-DMA, around 1.3390 by the press time, the USD/CAD remains off the bull’s radar unless staying below the 50-DMA hurdle of 1.3495.