USD/CAD hangs near multi-week lows, focus remains on US/Canadian jobs report

The USD/CAD pair remained on the defensive through the first half of the European session and was last seen hovering near four-week lows, just below mid-1.2500s.

The recent bullish run in crude oil prices – to the highest level since November 2014 – continued benefitting the commodity-linked loonie and acted as a headwind for the USD/CAD pair. On the other hand, the US dollar was seen consolidating in a range and did little to impress bullish traders or provide any impetus to the major.

That said, rallying US Treasury bond yields – amid prospects for an early policy tightening by the Fed – helped limit any meaningful USD slide. This, in turn, was seen as a key factor that held traders from placing any aggressive bearish bets around the USD/CAD pair and led to a subdued/range-bound price action on the last day of the week.

Investors seem convinced that the Fed will soon begin tapering its bond purchases and raise interest rate in 2022. Apart from this, worries that the recent surge in crude oil/energy prices will stoke inflation pushed the yield on the benchmark 10-year US government bond to four-month tops, around the 1.60% threshold on Friday.

Market participants now await the release of the closely-watched monthly employment figures from the US and Canada. The popularly known NFP report will determine the Fed's next policy move and drive the greenback in the near term. Separately, Canadian jobs data would offer clues on the strength of the domestic economy. This, along with oil price dynamics, will influence the Canadian dollar and provide a fresh directional impetus to the USD/CAD pair.

Technical levels to watch