USD/CAD rises towards 1.2800 amid US dollar strength, concerns over Canadian oil exports

USD/CAD jumps to a one-week high of 1.2775, currently around 1.2765, during Monday’s Asian session. The loonie pair marked heaviest gains since late-October during Friday amid broad US dollar strength and WTI weakness. The bulls recently seemed to have taken clues from the greenback’s sustained upside as well as doubts over Canada’s Keystone XL pipeline that could have boosted Canberra’s oil exports.

As per CBC News, US President-elect Joe Biden is planning to cancel the Keystone XL pipeline permit via executive action on his first day in office. The news relies on anonymous sources quoting, “Rescind Keystone XL pipeline permit" on a list of executive actions supposedly scheduled for Day 1 of Biden's presidency. “The proposed pipeline would connect terminals in Hardisty, Alberta, and Steele City, Nebraska for export of synthetic crude oil and diluted bitumen from the oil sands of Canada,” said the news further.

It should be noted that the risks remain heavy even as weekend numbers of the coronavirus (COVID-19) have been slightly positive. However, fears of the virus are pushing the UK towards stricter activity restrictions from Monday whereas Japan’s Premiership is also in danger due to the recently surging virus cases in Tokyo.

Read: New UK covid stats lower despite variant, vaccine rolled out

Further, talks surrounding Janet Yellen’s favor for market-based US dollar value and likely status of being the only official to speak on the currency failed to provide any clear direction to the market sentiment. Moreover, WTI’s inability to keep the bounce off one week low, marked on Friday, also exert downside pressure on the USD/CAD prices. That said, the energy benchmark currency stays heavy around $52.25.

Against this backdrop, S&P 500 Futures print 0.20% intraday losses while stocks in Japan and Australia also remain depressed by press time.

Moving on, China’s Q4 GDP and December’s data-dump, comprising Retail Sales and Industrial Production, will offer immediate direction to market sentiment. However, virus woes and chatters over US President-elect Joe Biden’s stimulus keep the driver’s seat.

Technical analysis

While 21-day SMA near 1.2765 guards immediate upside of the USD/CAD, a downward sloping trend line from November 13, at 1.2795 now, becomes a tough nut to crack for the bulls.