- Greenback struggles to find demand after Christmas break.
- WTI extends rally, comes within touching distance of $62.
- Coming up: EIA's weekly crude oil stock report and Baker Hughes' Rig Count.
The USD/CAD pair erased nearly 50 pips on Thursday pressured by the broad-based USD weakness and continued to push lower on Friday to trade below the 1.3100 handle for the first time since late October. As of writing, the pair was erasing 0.2% on a daily basis at 1.3096.
The lack of significant fundamental drivers in the holiday-shortened week suggests that the USD is reacting to year-end flows. The US Dollar Index, which rose to a multi-week high of 97.82 earlier in the week, lost its traction on Friday and was last down 0.3% on the day at 97.26.
Oil rally helps CAD gather strength
In the meantime, after closing nine out of the last ten trading days in the positive territory, crude oil extended its rally on Friday with the barrel of West Texas Intermediate advancing to its highest level since mid-September at $61.94 and provided an additional boost to the commodity-sensitive loonie. Later in the day, the US Energy Information Administration's weekly Crude Oil Stocks Change and Baker Hughes' Oil Rig Count data will be looked upon for fresh impetus.
Commenting on the pair's activity, "we expect USD/CAD to break out to the upside, but it is fair to say we have been surprised at CAD’s resilience," Rabobank analysts said. "To our mind, however, it is only a matter of time before data deteriorates and the market rep.”
Technical levels to watch for
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