USD/CAD ticked above the August high of 1.2949 to briefly touch a new high for the year.

The next level to watch is 1.2958, which was coincidentally almost exactly one year ago on Dec 21. Perhaps that's not a coincidence as year-end flows may be a factor.

If these levels don't hold, there isn't much standing in the way of 1.33-1.34. Obviously, omicron worries are hammering oil and some other commodities at the moment.

For USD/CAD, rate differentials aren't playing much of a factor as the BOC last week teed up a shift in language for January and a potential hike in March.

USDCAD daily chart

The issue is China and the potential for omicron there to cause widespread lockdowns, lower demand and bottlenecks. I doubt they can contain it so the best-case scenario might be for them to declare that it's not a dangerous variant and let it run. That's a low-probability outcome though, particularly with the Olympics coming in February.