USD/CAD drops below 1.3600 amid mildly bid oil prices, cautious mood ahead of key US data

• USD/CAD retreats from intraday high, pressured after two-day downtrend.
• Oil prices cheer downbeat US Dollar, hopes of more demand to pare losses at yearly low.
• Market sentiment dwindles ahead of the key data/events, mixed concerns surrounding China and Russia.
• US Michigan Consumer Sentiment Index, 5-year Inflation Expectations could entertain traders ahead of the key next week.

USD/CAD extends pullback from intraday high to 1.3580 as it probes the first weekly gain in three during early Friday. The Loonie pair’s latest losses could be linked to the recovery in oil prices, Canada’s key export item, as well as the US Dollar’s failure to rebound despite the sour sentiment.

WTI crude oil prints the first daily gain in six, up 1.08% intraday near $72.35 by the press time, as geopolitical fears join hopes of more demand from China to favor the energy buyers. Even so, the black gold remains near the yearly low marked the previous day.

On the other hand, the latest news from the Wall Street Journal (WSJ) cited the risks of the elevated tension between the US and China, as well as with Russia. "The US is set to levy fresh sanctions against Russia and China on Friday, actions that include targeting Russia’s deployment of Iranian drones in Ukraine, alleged human-rights abuse by both nations and Beijing’s support of alleged illegal fishing in the Pacific, according to officials familiar with the matter," reported the Wall Street Journal (WSJ) on early Friday.

The same pours cold water on the face of hopes that Sino-American relations will improve. Previously Reuters stated that China wants stabilized relations with the United States in the short term as it faces domestic economic challenges and push back in Asia to its assertive diplomacy, White House Indo-Pacific coordinator Kurt Campbell said on Thursday.

Elsewhere, US Treasury Secretary Janet Yellen said on Thursday that "Recession is not inevitable," while also declining to say whether the dollar had peaked against other currencies.

Amid these plays, the benchmark United States 10-year Treasury bond yields recovered from the lowest levels since mid-September but the yield inversion keeps suggesting recession fears and favor the US Dollar bulls, despite recently downbeat US data. On Thursday, US Initial Jobless Claims matched 230K market consensus for the week ended on December 02, versus the upwardly revised 226K prior. Further, the four-week average also printed 230K figure compared to 229K previous readings.

Looking forward, the preliminary readings of the Michigan Consumer Sentiment Index for December, expected 53.3 versus 56.8 prior, will entertain USD/CAD traders afterward. Also important to watch will be the University of Michigan’s (UoM) 5-year Consumer Inflation Expectations for the said month, 3.0% previous readings.

Technical analysis

50-DMA restricts immediate downside of the USD/CAD pair around 1.3500 but bearish Doji candlestick, seven-week-old resistance line probe bulls.