USD/CAD consolidates weekly gains around 1.3750
|- Loonie suffers the worst monthly decline since March 2020 versus the US dollar.
- US dollar holds firm on Friday, despite lower US yields.
- USD/CAD remain bullish and overbought.
The USD/CAD is about to end Friday trading around 1.3750/60, with a weekly gain of 175 pips, on the back of risk aversion that boosted the greenback against most currencies.
The rally of the greenback lost momentum on Friday amid an extension of the retreat in US yields and also as stocks stabilized. But ongoing concerns about global growth and geopolitical tensions weigh on market sentiment. With the Federal Reserve well decided to continue tightening, the upside of the dollar continues.
During the last three weeks, USD/CAD rose almost 800 pips. After such a move, the question about how much can it keep rising in the short-term seem normal. These are volatile times and in those circumstances anything can happen.
Even as markets calm down, moves larger than average in USD/CAD are likely next week. Market participants will continue to look particularly at the bond market, stocks and the pound. Next Friday, Canada and the US will release the official employment reports.
From a technical perspective, USD/CAD is moving with a bullish bias. The only bearish sign is the extreme overbought readings. The next strong barrier is the 1.3900 area. During the last days, the pair has been moving sideways between 1.3750 and 1.3600, holding onto most of the recent gains.
Technical levels
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