USD/CAD licks its wounds near April 2018 low as Biden revokes Keystone XL oil pipeline permit

• USD/CAD consolidates recent losses, the heaviest in three weeks that refreshed multi-month low.
• US President Joe Biden confirms revocation of Keystone XL oil pipeline permit in his first executive order.
• BOC’s cautious optimism, upbeat GDP forecast joined US dollar weakness to favor the bulls earlier.
• Second-tier Canadian data, ECB and WTI moves can offer intermediate direction but Biden’s first actions will be the key.

USD/CAD stays heavy near the fresh 33-month low, flashed the previous day, while easing to 1.2635 during the early Asian session on Thursday. In doing so, the quote pays a little heed to the news suggesting hardships for Canada as Joe Biden rolls out his first executive orders as the 46^th President of the United States.

While rejecting the urge from Canadian leader Justin Trudeau, Biden revokes the permission of the Keystone XL oil pipeline while citing the environmental issues. Oil is the key export item for Canada and any negatives for the same will weigh on the Canadian Dollar. It’s worth mentioning that environmental protection and support for clean energy have been Biden’s campaign promises, which in turn suggest further hardships for the oil economy and Canada.

Read: Joe Biden signs executive action to rejoin Paris Climate Accord “as of today”

It should be noted oil prices also declines recently after the private weekly inventory report marked a surprise increase in the stockpile for the week ended on January 15. As per the latest Crude Oil Stock report from the American Petroleum Institute (API), 2.562 million barrels of oil were added to the inventories versus the previous depletion of 5.821 million. Following the news, WTI dropped below $53.00, currently around $52.95.

On Wednesday, the Bank of Canada (BOC) widely matched market expectations of keeping the current monetary policy unchanged. However, the upward revision to the GDP forecasts and showing a little worry for the latest jump in the Canadian dollar (CAD) prices dragged USD/CAD to the fresh low since April 2018. However, Bank of Canada Governor Tiff Macklem said that there is a risk of further C$ gains that could present downside risks to the BOC’s economic assessment.

Overall, market sentiment remains upbeat and weighs on the US dollar as Biden’s Presidency signals further stimulus and faster victory over the coronavirus (COVID-19). That said, Wall Street benchmarks closed positive with S&P 500 Futures refreshing record top, by the end of Wednesday’s trading.

Moving on, Canada’s ADP employment figures and housing market data can join updates from the ECB to offer small moves to the USD/CAD prices. Though, US President Biden’s actions will be important to watch.

Technical analysis

Support line of a five-week-old falling wedge formation, at 1.2585 now, lures USD/CAD sellers unless the quote breaks the 21-day SMA immediate hurdle around 1.2735.