USD/CAD grinds higher around 1.2650 amid steady oil, sour sentiment

USD/CAD remains indecisive after refreshing a fortnight top the previous day, retreating from intraday high to 1.2645 ahead of Tuesday’s European session.

In doing so, the Loonie pair struggles to find a balance between the risk-off mood and hawkish headlines for Canada’s key export item, WTI crude oil, amid sluggish trading hours.

That said, market sentiment sours as traders await the Federal Open Market Committee (FOMC) meeting with mixed clues over the Fed’s next moves. Among them were the recently downbeat US Markit PMIs and the US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data.

On other hand, geopolitical fears surrounding Russia and Ukraine escalate as Moscow refrains from accepting the global pressure towards a ceasefire even as political leaders warn of economic sanctions.

As the risk-off mood underpin US Treasury yields and the US dollar demand, WTI crude oil prices remain pressured, down 0.16% intraday around $83.45 by the press time. It’s worth observing that the easing fears of Omicron and China’s readiness to defend investors amid financial and covid risks keep oil buyers hopeful.

Moving on, the US CB Consumer Confidence for January, prior 115.8, will precede the weekly private oil inventory data from the American Petroleum Institute (API) to direct short-term USD/CAD moves. However, major attention will be given to Wednesday’s Fed meeting as markets expect Chairman Jerome Powell to signal a March rate hike.

Technical analysis

Unless crossing a five-week-old descending resistance line, around 1.2660 by the press time, odds of the USD/CAD pullback towards the 200-DMA retest, near 1.2500 at the latest, can’t be ruled out.