USD/CAD slides below 1.3600 as US Dollar stays pressured, Oil prices rally amid holiday season

• USD/CAD takes offers to refresh intraday low, snapped three-week uptrend in the last.
• Oil prices rally more than 1.0% on headlines surrounding Russia, China.
• Softer US PCE Inflation data weighed on hawkish Fed bets.
• Light calendar, year-end holiday mood to restrict USD/CAD moves but risk catalysts are crucial to watch.

USD/CAD holds onto the previous week’s bearish bias, first in the last four, as it renews the intraday low of around 1.3565 during early Tuesday.

The Loonie pair’s latest losses could be linked to the broad-based US Dollar weakness on softer US data, as well as firmer prices of Canada’s key export item, namely WTI crude oil.

US Dollar Index (DXY) printed a two-week downtrend by the end of Friday as downbeat US statistics pushed back hawkish expectations from the Federal Reserve (Fed), especially when the policymakers are hesitant on strong rate hikes. That said, the Core US Personal Consumption Expenditures (PCE) Price Index, mostly known as the Fed’s favorite inflation gauge, matched 4.7% YoY forecasts for November versus 5.0% prior.

Further, the Durable Goods Orders for the said month marked a contraction of 2.1% compared to -0.6% expected and 0.7% previous readings. More importantly, the Nondefense Capital Goods Orders ex Aircraft marked improvement of 0.2% compared to 0.0% expected and 0.3% revised down prior. Additionally, the Federal Reserve (Fed) Bank of Atlanta’s GDPNow tracker rose to show +3.7% annualized growth for the fourth quarter (Q4) versus +2.7% previous estimates.

On the other hand, WTI crude oil renews its intraday high near $80.70, up 1.65% on a day, as China’s easing of Covid restrictions joins the fresh Russia-Ukraine tussles. On Monday, China’s National Health Commission (NHC) said that China will stop requiring inbound travelers to go into quarantine starting from January 8. It should be noted that Russian Foreign Minister Sergei Lavrov was recently quoted saying that Moscow’s proposals for “demilitarisation” and “denazification” of Ukraine are well known to Kyiv and it is up to Ukrainian authorities to fulfill them. During the weekend, the Ukrainian Foreign Ministry mentioned that Ukraine calls for Russia’s removal from United Nations.

Amid these plays, S&P 500 Futures print mild gains around 3,885 while the US Treasury bond yields struggle for clear directions after posting the biggest weekly jump since early April.

Looking forward, USD/CAD is likely to remain pressured amid expected inactivity due to the holiday season and a light calendar. However, the risk catalysts may entertain the Loonie pair traders.

Technical analysis

A daily closing below the six-week-old ascending trend line, around 1.3585 by the press time, directs USD/CAD towards the 50-DMA support surrounding 1.3535.