Rebounding USD/CAD loses momentum on oil price

The recovery of USD/CAD has been suspended below 1.3610. The Canadian dollar is paring its losses on the back of a mild rebound in oil prices. In the same time, the lower US Treasury bonds are impacting the demand for the US dollar. The yield of the benchmark US 10-year bond is trading at 3.867% at the moment of writing, 1.5 basis points lower on the day after having opened the session 2.4% down.

The US dollar is treading water in the vicinity of 1.3600 on Thursday, following its Wednesday’s solid recovery and marginal gains. The pair’s run-up from 1.3485 was capped at 1.3610 and has remained wavering on both sides of the 1.3600 level for most of the day.

The Canadian dollar ticks up with oil prices trimming losses. The Canadian dollar is trimming losses, following its weakest daily performance in the last two weeks amid a moderate recovery in oil prices and the sluggish US dollar’s performance in a choppy trading session.

Oil prices have appreciated about $1,5 during the European trading session, with the WTI crude, picking up to $78.40 from session lows at $76.80, which might have offered some support to the commodity-linked Canadian dollar.

On the data front, US initial Jobless Claims increased by 9.000 amounting to 225,000 in the week of December 24, with the 4-week moving average declining by 250 to 221,000 from the previous week, according to data released by the US Department of Labour.

This reading failed to cheer the US dollar, which has tracked the slight decline in US Treasury bond yields. The US Dollar Index has confirmed its decline below the 104.00 level, reaching fresh intra-day lows at 103.66 so far.

Investor are still concerned about a potential recession in the first quarter of 2023 and a likely slowdown on the Fed’s tightening cycle are weighing on US dollar demand

On the global arena, news about the soaring COVID-19 cases in China and the escalating tensions in Ukraine after Kremlin’s refusal to accept Zelenski’s peace deal proposal have crushed the optimism witnessed earlier this week after China scrapped its restrictions for inbound travelers.