USDCAD defends 1.3300 to snap four-week downtrend, even as oil rebounds

USDCAD takes offers to pare the first weekly gain in five around 1.3300 during early Friday morning. In doing so, the Loonie pair takes clues from the broad-based US Dollar retreat and a corrective bounce in the prices of Canada’s main export item, namely WTI crude oil.

That said, the US Dollar Index (DXY) prints mild losses around 106.40 as cautious optimism surrounding the US Government’s action and the market’s hopes for the Federal Reserve’s (Fed) next move, as per the Reuters poll, weigh on the greenback’s safe-haven demand.

“Biden Administration will ask Supreme Court to allow the student loan debt relief program to resume,” stated CNBC. Elsewhere, the Reuters poll stated that the Federal Reserve will downshift in December to deliver 50 basis points (bps) interest rate hike, but a longer period of US central bank tightening and a higher policy rate peak are the greatest risks to the current outlook.

Furthermore, downbeat prints of the Philadelphia Fed Manufacturing Index and housing numbers for October might have raised doubts about the recent hawkish Fedspeak.

It’s worth noting that St. Louis Federal Reserve President James Bullard mentioned on Thursday that the US Federal Reserve's (Fed) monetary policy is not yet in a range estimated to be sufficiently restrictive to reduce inflation. On the same line, Minneapolis Federal Reserve Bank President Neel Kashkari said, “With inflation still high but a lot of monetary policy tightening already in the pipeline, it's unclear how high the US central bank will need to raise its policy rate.”

On the other hand, WTI crude oil adds 0.70% intraday to print $82.30 as the price by the press time. Even so, the black gold remains on the back foot around a 1.5-month low while posting the second consecutive weekly loss.

The US Dollar’s latest pullback could be held responsible for the energy benchmark’s rebound even as questions over China’s covid policy test the bulls. Also likely to have favored the WTI prices could be the headlines suggesting the US sanctions on Iran.

With this, the USDCAD pair pleases the intraday bears amid cautious optimism in the market even as the latest rebound in the US Treasury yields tease the weekly gains. While portraying the mood, the benchmark US 10-year Treasury yields bounced off a six-week low before staying mostly unchanged at 3.77% whereas the S&P 500 Futures prints mild gains at the latest.

Given the lack of major data/events, USDCAD may witness a lackluster day ahead of the US Existing Home Sales and Canadian Industrial Production for October.

Technical analysis

Successful trading beyond 100-DMA, around 1.3250 by the press time, keeps USDCAD buyers hopeful.