USD/CAD Forecast: Bulls await move beyond 1.2900, US/Canadian jobs report in focus

• USD/CAD regained positive traction on Thursday and inched back closer to the weekly high.
• A slump in oil prices undermined the loonie and offered support despite renewed USD selling.
• The upside remains capped as traders await the monthly jobs report from the US and Canada.

The USD/CAD pair attracted some dip-buying near the 1.2820-1.2815 region on Thursday and reversed a major part of the previous day's downfall from a one-week high. The intraday move up was exclusively sponsored by a slump in crude oil prices, which tend to undermine the commodity-linked loonie. An aggressive policy tightening by major central banks to curb soaring inflation has raised concerns about a global economic downturn, which could hit fuel demand. This, along with indications that the current tight supply is abating, dragged the black liquid to a nearly six-month low.

Bulls, meanwhile, seemed rather unaffected by the emergence of fresh selling around the US dollar. Despite more hawkish remarks by several Fed officials this week, investors have been pushing back against the idea of a larger interest rate hike at the September FOMC meeting. Apart from this, signs of stability in the financial markets weighed on the safe-haven greenback. Nevertheless, the USD/CAD pair settled near the top end of its daily trading range and edged back closer to the weekly high during the Asian session on Friday. The uptick, however, lacked follow-through buying.

A goodish rebound in crude oil prices, to a larger extent, offset modest USD strength and acted as a headwind for the USD/CAD pair. Investors also seem reluctant to place aggressive bets and prefer to wait for a fresh catalyst. The monthly jobs data from the US and Canada are scheduled for release later during the early North American session. The popularly known US NFP report is more likely to overshadow Canadian employment details and will play a key role in influencing the USD price dynamics. This, in turn, should help determine the next leg of a directional move for the major.

Technical Outlook

From a technical perspective, spot prices, so far, have been struggling to find acceptance above the 50% Fibonacci retracement level of the 1.2518-1.3224 strong rally. This makes it prudent to wait for some follow-through buying beyond the 1.2890-1.2900 region before positioning for any further appreciating move. The USD/CAD pair might then climb towards the mid-1.2900s, or the 38.2% Fibo. level. The subsequent move up would pave the way for a move towards reclaiming the 1.3000 psychological mark en-route the 1.3055-1.3060 region, or the 23.6% Fibo. level.

On the flip side, weakness below the 1.2835-1.2830 region now seems to find decent support near the 1.2800-1.2790 zone. The said area marks confluence support comprising the 61.8% Fibo. level and the 100-day SMA. A convincing break below would be seen as a fresh trigger for bearish traders and make the USD/CAD pair vulnerable. Spot prices could then accelerate the fall towards the 1.2700 round-figure mark before eventually dropping to the next relevant support near the 1.2655-1.2650 region.