November 27, 2022

  • USD/CAD is hovering near intraday highs after posting its biggest daily decline in two weeks.
  • Oil prices are stabilizing after recovering from 10-month lows.
  • Market concerns ahead of key dates/events combine with China’s Covid issues to challenge Canadian dollar.

USD/CAD is opening bids to refresh intraday high near 1.3380 early Wednesday. The recent rebound in the loonie pair could be related to the poor market sentiment as well as a pause in WTI crude oil recovery moves. However, cautious sentiment ahead of the fundamentals/events is challenging pairs buyers.

Risk appetite is washing away optimism from the previous day, as headlines suggesting a surge in China’s Covid numbers joined the Reserve Bank of New Zealand’s (RBNZ) highly hawkish move to suggest global central banks are on hold breath are. In addition, concerns over the November preliminary PMI reading, Federal Open Market Committee (FOMC) meeting minutes and US durable goods orders for October weigh on sentiment.

As S&P 500 futures reflect sentiment, they are posting modest losses as US 10-year Treasury yields struggle for clear direction near 3.75%.

It is worth noting that prices of Canada’s top export, WTI crude, fluctuated around $81.00 after bouncing off a 10-month low the previous day. The black gold rose on the previous day amid fears of a supply crunch and oil price ceiling talks, as well as Saudi Arabia’s refusal to back OPEC+ output-boosting signals.

On Tuesday, firmer sentiment and a rebound in oil prices favored USD/CAD bears. In the same vein, the upbeat Canadian Retail Sales data for September could fall. The loonie pair ignored firmer US data and hawkish comments from Federal Reserve (Fed) officials. However, the Richmond Fed Manufacturing Index improved to -9 in November from -10 previously, while Kansas City Federal Reserve Chair Esther George recently said, “(We) may well accept a higher rate for some time to accommodate the Convince households to hold on to savings.”

Moving forward, USD/CAD is likely to see a soft day amid market fears ahead of the event. However, traders will pay close attention to oil fundamentals and Fed minutes for clear direction.

Technical Analysis

A clear reversal from the 21-DMA hurdle at 1.3466 as well as a downside break of the 1-week old ascending trend line currently around 1.3390 gives USD/CAD bears hopes of a refresher for the month lows around 1.3230.

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