- USD/CAD struggles to capitalize on an intraday uptick to a multi-week high amid a retreating USD.
- Crude Oil prices climb to over a one-week high and underpin the Loonie, further capping the pair.
- Traders now look forward to Canadian jobs data and Fed speakers for short-term opportunities.
The USD/CAD pair retreats slightly from the vicinity of mid-1.3900s, or over a three-week high touched earlier this Friday, amid a combination of negative factors. Receding demand worries have assisted Crude Oil prices to build on a strong recovery from a nearly one-month low set on Monday and climb to a one-and-a-half-week top. This, along with hopes for a US-Canada trade deal, seems to underpin the commodity-linked Loonie. Apart from this, an intraday US Dollar (USD) pullback from the highest level since April 10 acts as a headwind for the currency pair.
Any meaningful USD corrective decline, however, seems elusive on the back of the Federal Reserve's (Fed) hawkish pause and trade optimism. In fact, the US central bank signaled on Wednesday that it is not leaning towards cutting interest rates anytime soon amid the uncertainty over trade tariffs. Meanwhile, US President Donald Trump and British Prime Minister Keir Starmer announced a limited bilateral trade deal on Thursday. Furthermore, US Commerce Secretary Howard Lutnick told CNBC that Washington will roll out dozens of trade deals over the next month.
Adding to this, the Trump administration is reportedly considering lowering the tariffs on China to 50% from 145% as soon as next week. This comes ahead of the crucial US-China tariff negotiations over the weekend and helps to ease market concerns that an all-out trade war might trigger a US recession, which, in turn, should act as a tailwind for the Greenback. US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer are set to meet their Chinese counterparts in Switzerland on Saturday to discuss trade and economic issues.
Meanwhile, the OPEC+ decision to speed up output increases continues to stoke fears of oversupply and might cap the upside for Crude Oil prices. This might hold back traders from placing aggressive bullish bets around the Canadian Dollar (CAD) ahead of the monthly jobs report from Canada and lend support to the USD/CAD pair. Traders will further take cues from speeches by influential FOMC members, which will drive the USD demand and provide some impetus. Nevertheless, spot prices remain on track to register strong weekly gains.
USD/CAD 4-hour chart
Technical Outlook
The overnight breakout above the 1.3900 mark, or the top boundary of a three-week-old trading range, could be seen as a key trigger for the USD/CAD bulls. The subsequent move up, however, falters near the 23.6% Fibonacci retracement level of the March-May downfall. Moreover, oscillators on the daily chart – though they have been recovering from lower levels – are yet to confirm a positive bias, warranting some caution before confirming that spot prices have bottomed out in the near term.
In the meantime, the trading range resistance breakpoint, around the 1.3900 mark, might offer some support to the USD/CAD pair. Some follow-through selling below the 1.3880 region could drag spot prices to the 1.3850-1.3845 intermediate support en route to sub-1.3800 levels. This is followed by he year-to-date trough, around mid-1.3700s touched on Tuesday, which, if broken decisively, will set the stage for the resumption of the recent downfall from over a two-decade high set in February.
Meanwhile, bulls might now await a sustained move beyond the 1.3940-1.3945 region (23.6% Fibo. level) before placing fresh bets. The USD/CAD pair might then aim to challenge the very important 200-day Simple Moving Average (SMA), currently pegged just above the 1.4000 psychological mark. The subsequent move up could extend further towards the 38.2% Fibo. level, around mid-1.4000s, en route to the 1.4100 neighborhood and the 1.4140 area, or the 50% Fibo. level.
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