USDCAD struggles to mirror oil price recovery ahead of Canada's inflation

Market in consolidation phase

Monday’s cautious optimism and a lack of major catalysts kicked off the market's consolidation phase. A technical correction and pullback in Treasury yields triggered the US Dollar’s long-awaited dip, allowing riskier assets to recover. Gold posted its biggest daily gain in three months. Meanwhile, USDCAD broke its six-day winning streak, falling the most in eight days. Meanwhile, USDJPY struggled to reflect the US Dollar's weakness, amid mixed signals from Bank of Japan Governor Kazuo Ueda.

EURUSD, GBPUSD fade recovery, USDJPY retreats

The US Dollar’s pullback allowed EURUSD and GBPUSD to recover from multi-week lows, but dovish remarks from European Central Bank (ECB) and Bank of England (BoE) officials reignited the downtrend on Tuesday. ECB’s Gabriel Makhlouf cautioned against expecting a December rate cut, while BoE’s Megan Greene highlighted a downward trend in UK services inflation.

USDJPY failed to capitalize on the US Dollar’s weakness, as BoJ Governor Ueda opposed further rate hikes. The Yen pair retreated early Tuesday after Japanese officials called for higher wages and curbing excessive FX moves.

AUDUSD, NZDUSD edge higher

A slight market optimism, fueled by China’s readiness for more stimulus and hawkish signals from the Reserve Bank of Australia (RBA), helped AUDUSD recover from a three-month low. NZDUSD followed suit, buoyed by China’s positive outlook, despite less impressive data and events from New Zealand.

USDCAD licks its wounds

USDCAD posted its biggest daily drop over a week, driven by US Dollar weakness, a corrective bounce in Crude Oil, and anticipation of Canada’s inflation data. However, a dovish outlook on the Bank of Canada (BoC) and challenges for energy buyers provided support, preventing further declines for the Loonie pair.

Gold extends rebound, Crude Oil buyers struggle

Gold saw its biggest gain since early August, supported by the US Dollar's pullback, positive China news, and cautious market optimism. Technical support and hopes for lower rates from major central banks also fueled the rally, despite resistance from Fed and BoJ officials.

Meanwhile, WTI crude oil surged on escalating geopolitical tensions, delays in OPEC+ output decisions, and expectations of higher energy demand from China’s new stimulus. However, data from Beijing and a lack of concrete action in the Middle East challenged the bullish sentiment in oil.

Cryptocurrencies fail to defend buyer support

Like other assets, Bitcoin (BTCUSD) and Ethereum (ETHUSD) started the week positively, driven by US Dollar weakness and industry optimism. On Tuesday, Bitcoin stayed strong following MicroStrategy's BTC acquisition, while Ethereum pulled back due to a rise in exchange reserves.

Latest moves of key assets

• WTI crude oil struggles to defend the previous day’s recovery around $69.00, mildly bid by the press time.
• Gold stays on the front foot during a two-day rebound, up half a percent near $2,625 at the latest.
• The USD Index remains pressured, down for the third consecutive day, to 106.20 as we write.
• Wall Street closed mixed but the Asia-Pacific shares edged higher. However, European and British equities lack clear direction during the initial trading hour.
• BTCUSD defends the week-start run-up as bulls attack $92,000 but ETHUSD retreats to $3,130 by the press time.

A comparatively busy day ahead…

Tuesday's economic calendar includes the BoE Monetary Policy Report, Canadian CPI, BoC CPI, and US housing data. While these events may not excite momentum traders, USDCAD is unlikely to extend its recent weakness due to a dovish BoC outlook and doubts about Crude Oil's recovery. The US Dollar could see a corrective bounce, challenging EURUSD and GBPUSD recoveries, while Gold may keep the latest rebound amid market uncertainty.

Predictions for Key Assets

• Recovery Expected: USDCAD, USDJPY, US Dollar, Silver, BTCUSD, ETHUSD
• Further Downside Likely: AUDUSD, NZDUSD, GBPUSD
• Mostly Sideways Expectations: Nasdaq, Gold, DJI30, USDCNH
• Slow & Gradual Fall Expected: DAX, FTSE 100, EURUSD, Crude Oil

May the trading luck be with you!