USD/CAD retakes 1.2700, bullish oil prices might cap gains ahead of US/Canadian jobs data

The USD/CAD pair added to its intraday gains and shot back above the 1.2700 round-figure mark during the early part of the European session.

The pair attracted some buying for the second successive day on Friday, with bulls now looking to build on the overnight bounce from the vicinity of mid-1.2600 – the weekly low. A follow-through uptick in US Treasury bond yields, along with the cautious market mood extended some support to the safe-haven US dollar. This, in turn, was seen as a key factor that acted as a tailwind for the USD/CAD pair.

Apart from this, the bid tone could also be attributed to some repositioning trades ahead of the key monthly jobs report from the US and Canada, due later during the early North American session. The prevalent strong bullish sentiment surrounding crude oil prices could underpin the commodity-linked loonie and cap gains for the USD/CAD pair. This, in turn, warrants some caution for aggressive bullish traders.

Crude oil prices remained well supported by worries about tight global supplies and geopolitical tensions. Moreover, a massive winter storm across central and northeast United States disrupted oil production in the Permian Basin. This was seen as another factor that pushed the commodity to a fresh seven-year high, which should benefit the Canadian dollar and keep a lid on any meaningful positive move for the USD/CAD pair.

The market focus will remain glued to the US NFP report, which is expected to show that the economy added 150K jobs in January as against the 199K reported in the previous month. Traders might further take cues from Canadian employment details. This, along with oil price dynamics, should provide some impetus to the USD/CAD pair and allow traders to grab some short-term opportunities.

Technical levels to watch