USD/CAD: Heavy below 1.3000 as oil prices surge on Iranian attacks

• USD/CAD fails to hold onto recovery gains.
• Rallying prices of Canada’s key exports, mainly due to Iran attacks on the US facilities in Iraq, seems to weigh on the pair.
• US reaction, data will offer a busy day ahead.

Having failed to stay strong above the 1.3000 mark, USD/CAD declines to 1.2990 during early Wednesday. The quote earlier benefited from the US dollar strength and a weakness in oil prices, the key export item to Canada. Recently, the pair bears the burden of Iranian strikes on the US airbase in Iraq.

Iran has done it.

Tehran fired multiple missiles over the US airbase in Baghdad during early Wednesday in Asia. The strikes were in response to the Trump administration orders to kill their key commander Qasem Soleimani.

While the US diplomats are currently discussing damages and preparing for a response (probably), investors have turned risk-averse and the energy prices are also on the rise.

Read: Iran’s missiles have hit American base near Erbil airport in Iraq’s Kurdistan – Reuters citing Fars

Portraying this, the US 10-year treasury yields lose nearly 10 basis points to 1.72% whereas S&P 500 slips below 3,200 mark. Further, WTI reversed its losses since the week start while flashing fresh 8.5-month high around $65.70, currently near $64.85.

In addition to the US response to Iranian strikes, traders will also keep eyes on the economic calendar as it offers an early signal to Friday’s US Nonfarm Payroll (NFP) data. The US ADP Employment Change for December is likely to rise to 160K from 67K prior.

Technical Analysis

October low near 1.3040 acts as an additional resistance beyond 1.3000 whereas any downside below the recent low of 1.2944 can recall mid-October 2018 lows surrounding 1.2915.