- USD/CAD witnessed some selling on Friday amid a modest USD pullback from multi-month tops.
- An uptick in crude oil prices underpinned the loonie and contributed to the intraday selling bias.
- A combination of factors might continue to lend support to the USD and limit losses for the pair.
The USD/CAD pair edged lower through the Asian session and was last seen hovering near the lower end of its intraday trading range, just below the 1.2600 mark.
A combination of factors failed to assist the pair to build on the previous day’s positive move to over two-week tops, instead exerted some downward pressure on the last trading day of the week. A modest pickup in crude oil prices underpinned the commodity-linked loonie. This, along with some US dollar profit-taking, further contributed to the USD/CAD pair’s downtick.
Oil prices bounced back on Friday amid concerns that the blockage of the Suez Canal – one of the world’s busiest shipping channels for crude and refined fuels – could squeeze supply. Investors, however, remain worried that the third wave of COVID-19 infections and fresh lockdowns in Europe may slow the anticipated recovery in fuel demand. This, in turn, might cap gains.
On the other hand, the impressive pace of coronavirus vaccinations, the optimistic outlook for the US economic recovery and a fresh leg up in the US Treasury bond yields might help limit any meaningful USD decline. Thursday’s better than expected US Jobless Claims, which fell to a one-year low of 684K, reinforced the narrative of a relatively faster recovery from the pandemic.
Adding to the optimism, US President Joe Biden – in his first formal news conference on Thursday – said that he would double the vaccination rollout plan. Having reached the previous goal of 100 million shots well ahead of schedule (42 days), Biden made an ambitious pledge of administering 200 million vaccine shots in 100 days. This could further extend some support to the buck.
Market participants now look forward to the US economic docket, featuring the releases of Personal Income/Spending figures for February, Core PCE Price Index and revised Michigan Consumer Sentiment index. The data might influence the USD, which along with oil price dynamics would produce some meaningful trading opportunities around the USD/CAD pair.
Technical levels to watch