- USD/CAD regained positive traction on Friday and recovered the previous day’s losses.
- Sliding crude oil prices undermined the loonie and remained supportive of the uptick.
- A subdued USD price action capped gains for the major ahead of US/Canadian data.
The USD/CAD pair held on to its modest intraday gains through the early European session, albeit has retreated around 20-25 pips from daily tops. The pair was last seen trading just below the 1.2700 mark, up around 0.10% for the day.
The pair managed to regain positive traction on the last trading day of the week and recovered the previous day's losses, though lacked any strong follow-through buying. A modest pullback in crude oil prices undermined demand for the commodity-linked loonie and was seen as a key factor that provided a modest lift to the USD/CAD pair.
In fact, the front-month WTI futures retreated further from 13-month tops and dropped around 1.5% on Friday. The downfall was sponsored by worries that the lack of demand from Texan refiners will lead to a build in crude stocks over coming weeks. The black gold was further pressured by a possible reduction in the US-Iran tension.
The supporting factor, to some extent, was offset by a softer tone surrounding the US dollar, which was being weighed down by Wednesday's disappointing US labor market data. The US Initial Weekly Jobless Claims unexpectedly jumped to 861K during the week ending February 13 and the previous week's reading was also revised higher.
That said, a fresh leg up in the US Treasury bond yields helped limit further losses for the USD. Investors remained optimistic that the passage of US President Joe Biden's $1.9 trillion stimulus package will lead to a faster economic recovery and a possible acceleration in inflation, which pushed the US bond yields to one-year tops earlier this week.
It will now be interesting to see if bulls can capitalize on the move of the USD/CAD pair continues with its struggle to break through 50-day SMA hurdle near the 1.2745 region. Market participants now look forward to the release of Canadian Retail Sales data for some impetus later during the early North American session.
Meanwhile, the US economic docket highlights the release of flash PMI prints (Manufacturing and Services) and Existing Home Sales data. Apart from this, the US bond yields might influence the USD price dynamics and produce some trading opportunities around the USD/CAD pair.
Technical levels to watch
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