- USD/CAD is pulling back from the intraday high, under pressure after a two-day downtrend.
- Oil prices are encouraging the US dollar lower on hopes of stronger demand to pare losses to the year’s low.
- Market sentiment weakens ahead of key data/events, mixed concerns surrounding China and Russia.
- US Michigan Consumer Confidence Index 5-year inflation expectations could entertain traders ahead of next week’s key.
USD/CAD extends pullback from intraday high at 1.3580 as it probes first of three weekly gains early Friday. The loonie’s latest losses could be tied to the recovery in oil prices, Canada’s main export, as well as the US dollar’s inability to rebound despite sour sentiment.
WTI crude prints first daily gain in six, up 1.08% intraday near $72.35 at press time as geopolitical fears join hopes of increased demand from China for favor energy buyers. Even so, black gold remains close to the yearly low marked the day before.
On the other hand, the latest news from the Wall Street Journal (WSJ) cites the risks of high tension between the United States and China, as well as with Russia. “The United States is set to impose new sanctions against Russia and China on Friday, actions that include Russia’s deployment of Iranian drones in Ukraine, alleged human rights abuses by both nations and Beijing’s support for alleged illegal fishing in the Pacific, according to officials familiar with the matter,” The Wall Street Journal (WSJ) reported Friday morning.
The same thing throws cold water on hopes of improving China-US relations. Earlier Reuters had said that China wants stabilized relations with the United States in the short term as it faces domestic economic challenges and pushes back its assertive diplomacy in Asia, the White House coordinator for the country said on Thursday. ‘Indo-Pacific, Kurt Campbell.
Elsewhere, US Treasury Secretary Janet Yellen said on Thursday that “recession is not inevitable”, while declining to comment on whether the dollar had peaked against other currencies.
Amid these games, yields on benchmark 10-year U.S. Treasury bonds have rallied from the lowest levels since mid-September, but the reversal in yields continues to suggest recession fears and favors US Dollar bulls, despite recent downbeat US data. On Thursday, initial jobless claims in the United States matched the market consensus of 230,000 for the week ended Dec. 2, down from the previously-upward-revised 226,000. Additionally, the four-week average also printed a figure of 230,000 compared to the previous 229,000 readings.
Looking ahead, the Michigan Consumer Confidence Index’s preliminary reading for December, expected at 53.3 vs. 56.8 previously, will entertain USD/CAD traders going forward. It will also be important to watch the University of Michigan (UoM) 5-year consumer inflation expectations for the month in question, previous readings of 3.0%.
Technical analysis
The 50-DMA limits the USD/CAD pair’s immediate decline around 1.3500 but the bearish Doji candlestick, the bulls probes the seven-week-old resistance line.
