USD/CAD retreats from daily tops around the 200-DMA hover around 1.2450

The USD/CAD begins the week on the right foot, advancing some 0.01% trading at 1.2450 during the New York session at writing. As portrayed by US equity indices rising, the market sentiment is upbeat. The greenback lost traction after a better than expected US jobs report, while US T-bond yields rose.

USD/CAD rises, despite weaker US dollar amid higher crude-oil prices

The USD Index, which measures the buck's value against a basket of six rivals, loses 0.10%, sits at 94.10. Contrarily, the US 10-year Treasury yield advances almost three basis points, currently at 1.481%, acting as a tailwind for the USD/CAD pair.

Furthermore, higher crude oil prices failed to underpin the Loonie, with Western Texas Intermediate (WTI) the US crude oil benchmark rallying some 0.63%, trading at $80.87, approaching the $81.00 figure.

In the last week, three central banks pushed back against higher interest rates. Focusing on the Federal Reserve, the US central bank unveiled its bond-taper asset, to begin by the middle of this month. The pace of its reduction would be $15 billion each month, but it opened the door for further acceleration depending on economic conditions. However, they start to put aside employment figures, becoming more vocal about inflation, blaming supply bottlenecks and chain disruptions. 

After the FOMC meeting, market participants started to price in one interest rate hike by late 2022, which in the USD/CAD could be positive for USD bulls. However, the Bank Of Canada has already finished its QE program, and the market expects higher rates than in the US.

According to Royal Bank of Canada in a note to clients, "given inflation concerns and uncertainty about the degree of economic slack, we think the bank will lean toward an earlier rate hike in April. Our call for three rate increases in 2022 is still well short of the four to five hikes priced in by markets."

Later in the week, the US economic docket will feature fed speakers, inflation figures, and employment data that could offer fresh impetus for USD/CAD traders. 

USD/CAD Price Forecast: Technical outlook

The USD/CAD pair is steady above the bearish-flag top-trendline in the daily chart, approaching the 200-day moving average (DMA) at 1.2475. Furthermore, the Relative Strength Index (RSI), a momentum indicator at 53, aims slightly up, confirming an upward bias. However, USD bulls will need a daily close above the 200-DMA to resume the uptrend firmly. In that outcome, the confluence of the 50 and the 100-DMA within the 1.2530-40 range would be the next supply zone. A breach of the latter would expose 1.2600.

On the flip side, failure at the 200-DMA and a break beneath the 1.2400 figure would open the door for further losses. The first demand zone would be the October 27 low at 1.2300. A downward break would expose the October 21 low at 1.2287.