USD/CAD stays above 1.2700 with eyes on BOC, US President-elect Biden’s inauguration

• USD/CAD keeps latest recovery moves after Tuesday’s downside.
• Canada will not receive any Pfizer vaccine next week, government’s vaccination plan won’t be affected.
• Risks dwindle after Yellen’s speech, ahead of Biden’s White House entry.
• BOC is likely to keep interest rates unchanged, Canadian CPI will also be the key to watch.

USD/CAD wavers around 1.2735 during the latest corrective pullback amid Wednesday’s Asian session. The pair dropped the previous day amid broad US dollar weakness before bouncing off 1.2715 as risks turned heavy after US Treasury Secretary Nominee Janet Yellen spoke in the Senate. Also favoring the quote’s recent upside momentum could be the cautious sentiment ahead of the Bank of Canada’s (BOC) monetary policy meeting and US President-elect Joe Biden’s White House entry.

Ex-Fed Chair Yellen’s open back-up to Biden’s stimulus, by citing urgency to battle the pandemic and record low-interest rates, fails to cover her dislike for Trump’s investment proposals and China. The incoming Treasury Secretary also suggested a second stimulus boost in a month but couldn’t please the risk-takers.

Elsewhere, the New York Times came out with the news suggesting that Canada will not receive any vaccine shipments from Pfizer next week, as per an anonymous official, but that should not affect the government’s plan to administer six million doses of the Pfizer and Moderna vaccines by the end of March.

It should be noted that the coronavirus (COVID-19) woes are gradually coming back to the fore even as vaccinations are on the rise. The reason could be traced from Germany’s extended lockdown, fears in Japan and likely shortage of vaccines in New York.

Amid these plays, Wall Street closed in the green while the US 10-year Treasury yields eased to 1.09%.

Looking forward, virus updates and price moves of oil, Canada’s biggest export item, can offer intermediate moves ahead of the Canadian Consumer Price Index (CPI) data for December, expected to remain unchanged at 1.0% YoY. However, more important will be the BOC’s monetary policy and Biden’s inauguration party.

While BOC is likely to justify its latest bearish bias and keep the current monetary policy intact, any causalities in the White House won’t be taken lightly. Ahead of the BOC, TC Securities said, “The Bank of Canada rate decision and December CPI will share the spotlight on Wednesday. Although Governor Macklem has recently mused about an ELB below 0.25%, we do not expect this discussion to materialize into a micro-rate cut.”

Technical analysis

While 21-day SMA guards immediate upside around 1.2750, a downward sloping trend line from November 13, at 1.2781 now, becomes the key hurdle to watch for USD/CAD buyers.