USD/CAD takes offers below 1.2800 as risk-on mood drags US dollar, favors WTI

USD/CAD drops to 1.2766, down 0.19% on a day, as European traders prepare for Monday’s bell. The quote recently weakened after the US dollar’s broad losses, due to the fresh risk-on mood. Also favoring the sellers could be the gains of WTI, Canada’s highest export earner.

Market sentiment improves following the early Asian risk aversion, mainly on fears of further market restrictions after silver’s jump on chatters over social media platforms. The reason could be traced from Bloomberg’s news suggesting a meet between US President Joe Biden and 10 Republican leaders who earlier eyed a cut in the stimulus amount, mostly cheered as $1.9 trillion.

Also favoring the mood could be the reaction to the jump in the coronavirus (COVID-19) vaccinations in the developed nations and receding infections. Though, growing tensions over the vaccines and Australia’s fresh lockdown joins China’s downbeat PMIs to test the bulls.

On the contrary, Canada’s flight freeze to Mexico and China’s entry restrictions on Canadian travelers challenge the optimists, despite getting a less audience.

It’s worth mentioning that the improved market mood favored WTI to bounce off a one-week low, currently up 0.55% to $52.42, while dragging the US dollar index (DXY). That said, the DXY drops to 90.53, down 0.05% by press time. Additionally, S&P 500 Futures and stocks in Asia-Pacific are extra catalysts portraying the latest shift in sentiment.

Given the lack of major data/events from Canada, USD/CAD traders should pay attention to the US activity numbers for January, likely to recede, for short-term direction. However, a major focus will be on equities as markets have been very responsive to the share moves and chatters on the social media platforms. Further, US stimulus and the covid vaccine are extra catalysts worth observing.

Technical analysis

Although multiple failures to remain positive above 1.2800 favor USD/CAD sellers, coupled with the bearish MACD, an ascending trend line from January 21 and 200-bar SMA, respectively around 1.2765 and 1.2750, test intraday bears.