USD/CAD rallies to multi-week high, eyes 1.2700 mark ahead of Canadian/US data

USD/CAD gained strong positive traction for the second successive day on Friday.
Weaker oil prices undermined the loonie and acted as a tailwind amid stronger USD.
Investors look forward to Canadian Retail Sales, flash US PMIs for a fresh impetus.

Haresh Menghani FXStreet

The USD/CAD pair added to its intraday gains and shot to its highest level since March 17, around the 1.2680 region during the first half of the European session.

A combination of factors assisted the USD/CAD pair to build on the overnight solid rebound from over a two-week low and gain strong follow-through traction for the second successive day on Friday. A softer tone around crude oil prices undermined the commodity-linked loonie. This, along with broad-based US dollar strength, acted as a tailwind for spot prices.

Investors remain worried about slowing fuel demand in the wake of COVID-19 lockdowns in China - the world's biggest oil importer - and the prospect of weaker global growth. This, to a larger extent, overshadowed concerns about tight global supply and a potential European Union (EU) embargo on Russian gas, which, in turn, prompted fresh selling around crude oil.

On the other hand, the US dollar climbed to its highest level since March 2020 and continued drawing support from expectations for a more aggressive policy tightening by the US central bank. In fact, Fed Chair Jerome Powell all but confirmed a 50 bps rate hike at the upcoming policy meeting on May 3-4 and also hinted at consecutive increases this year.

The markets were quick to react and started pricing in three straight 50 bps rate hikes, which, in turn, pushed the rate-sensitive 5-year US government bond above 3% for the first time since 2018. The selloff in the US fixed income markets continued on Friday. This, along with the risk-off impulse, further boosted demand for the safe-haven greenback.

Market participants now look forward to the Canadian monthly Retail Sales and the flash US PMI prints for a fresh impetus during the early North American session. Apart from this, the US bond yields and the broader market risk sentiment will influence the USD. Traders will further take cues from oil price dynamics for short-term opportunities around the USD/CAD pair.

Technical levels to watch

USD/CAD

Overview
Today last price	1.2666
Today Daily Change	0.0085
Today Daily Change %	0.68
Today daily open	1.2581

Trends
Daily SMA20	1.2552
Daily SMA50	1.2648
Daily SMA100	1.2678
Daily SMA200	1.2628

Levels
Previous Daily High	1.259
Previous Daily Low	1.2458
Previous Weekly High	1.2676
Previous Weekly Low	1.2521
Previous Monthly High	1.2901
Previous Monthly Low	1.243
Daily Fibonacci 38.2%	1.254
Daily Fibonacci 61.8%	1.2509
Daily Pivot Point S1	1.2496
Daily Pivot Point S2	1.2412
Daily Pivot Point S3	1.2365
Daily Pivot Point R1	1.2628
Daily Pivot Point R2	1.2675
Daily Pivot Point R3	1.276

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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