- USDCAD struggles to capitalize on its modest intraday uptick amid modest USD weakness.
- Bearish crude oil prices undermine the Loonie and help limit the downside for the major.
- Traders now look forward to the crucial US CPI report before placing fresh directional bets.
The USDCAD pair fades an early European session spike to a fresh weekly high and quickly retreats to the 1.3525-1.3530 region in the last hour. The downside, however, seems cushioned amid bearish crude oil prices, which tend to undermine the commodity-linked Loonie.
In fact, WTI crude extends this week's sharp pullback from over a two-month high and remains depressed for the third successive day amid concerns over fuel demand in China. A raft of weak economic data from China pointed to sluggish growth in the world’s largest oil consumer, which, in turn, acts as a headwind for the black liquid. That said, a modest US Dollar weakness is likely to keep a lid on any meaningful upside for the USDCAD pair.
Traders might also refrain from placing aggressive bets and prefer to wait on the sidelines ahead of the release of the latest US consumer inflation figures. The crucial US CPI report will play a key role in determining the Fed's policy tightening path, which, in turn, will influence the USD price dynamics. Hence, it will be prudent to wait for strong follow-through buying before confirming that the USDCAD pair has formed a near-term bottom.
Even from a technical perspective, the post-NFP breakdown below the 50-day SMA support near the 1.3500 psychological mark favours bearish traders. This further warrants some caution for bullish traders and positioning for any meaningful appreciating move for the USDCAD pair. That said, an upside surprise from the US CPI will revive bets for a more aggressive policy tightening by the Fed and boost the US currency, negating the negative bias.
Technical levels to watch
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