USD/CAD Edges Higher As US T-bond yields Rise, Oil Slides

In the New York session, the USD/CAD pair trims Monday’s losses and reclaims the 1.2700 figure as the Canadian dollar weakens, as oil prices fall, a headwind for the Canadian dollar. At the time of writing, the USD/CAD is trading at 1.2702.

On Tuesday’s, Western Texas Intermediate (WTI), the US crude oil benchmark, falls more than 2%, as it moves beneath $90.00 per barrel. Alongside oil factors, the Canadian Trade Balance for December printed a deficit of C$0.14 billion when expectations were of a surplus of C$2.5 billion, hurt the prospects of the Canadian dollar.

US T-bond yields skyrocketing in the session, led by the 10-year benchmark note reaching a daily high at 1.97%, boosted the greenback.

The central banks worldwide are tightening conditions keeps markets trendless. Money markets futures expectations of the Federal Reserve, analysts estimate five hikes to the Federal Funds Rates (FFR) by the end of 2022.

USD/CAD traders get ready for Thursday’s US inflation figures. The Consumer Price Index (CPI) for January is expected at 7.3% while excluding volatile items like energy and food called Core CPI, which is foreseen at 5.5%.

The USD/CAD is upward biased but faces resistance at the 50-day moving average (DMA) at 1.2708. The pair consolidated around the 1.2650-1.2760 area, amid the lack of catalyst as market participants assess economic conditions.

However, once USD bulls reclaimed 1.2700, that would open the door for a test of the 50-DMA. A breach of the latter would expose the February 4 daily high at 1.2786. An upward break would send the USD/CAD higher towards the January 6 high at 1.2813.