The USD/CAD maintained a mildly bullish tone in the US session on Christmas Eve and was last spotted trading at the 1.2815 area.
The Loonie attracted buyers below the 1.2800 area earlier today, but that momentum hit a brick wall near the 1.2835 resistance. This action comes after the forex pair touched its highest point in 2021 at 1.2963 on Monday. The yearly all-time high recording came after crude oil prices slumped by 9.3% between December 16 and 20, which bolstered the USD/CAD.
USD/CAD Demand Capped on Refreshed Risk-On Investor Mood
However, USD bulls lacked the confidence to capitalize on this gain, which capped gains for the USD/CAD amid reduced US dollar demand. Optimism following reports that the Omicron COVID-19 variant might be less deadly than feared boosted investors’ confidence and risk appetite. This, in turn, weighed on safe-haven assets and currencies, including the US dollar.
Meanwhile, the Federal Reserve’s recent comments to implement at least three rate hikes in 2022 extended some support to the USD. Also, analysts’ expectations got confirmed by better-than-expected US inflation numbers on Thursday. Notably, the Federal Reserve’s go-to inflation tracker—the Personal Consumption Expenditures (PCE) Price Index—also recorded a jump to 5.7% YoY in November, the highest yearly growth in four decades.
Nonetheless, the prevailing fundamental and technical factors appear to back USD/CAD bulls. This indicates that the USD/CAD could glide towards the upside in the near term. However, momentum remains capped considering the end-of-year liquidity drought.
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